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 2017

Continued expansion driven by digital growth and store openings

DP Eurasia (DPEU.L), the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia, today announces its results for the year ended 31 December 2017.

Highlights

Financial Highlights

· Group revenue up 40.3% and system sales up 32.8%, driven by both like-for-like growth and store openings

o Turkish systems sales growth of 14.2%

o Russian system sales growth of 169.0% (95.0% based on RUB)

· Adjusted EBITDA up 28.9% to TRY 96.8 million (2016: TRY 75.1 million) mainly driven by the Group's strong sales growth

· Adjusted EBITDA margin as a percentage of system sales was 11.3%, with both regions delivering improved returns

o Turkey adjusted EBITDA margin increased by 0.5% points to 13.1%

o Russia adjusted EBITDA margin increased by 2.0% points to 6.1%

· Adjusted net income down 39.4% to TRY 21.7 million (2016: TRY 35.8 million) predominantly driven by the adverse movement of the Russian rouble against the Euro and additional depreciation and amortization driven by increased capital expenditure

Operational Highlights

· Turkey and Russia like-for-like growth predominantly driven by the Group's online ordering platforms - online delivery system sales as a share of delivery system sales reached 51.8% for the period (2016: 42.4%)

· 76 new stores were added in the year, bringing the total number to 643, including the opening of the 500th Turkish store and the 100th Russian store:

o Strong Russian store rollout with a record 49 additions, now expanding to cities outside of Greater Moscow

o 27 store openings in Turkey segment (including Azerbaijan and Georgia)

o A greater skew towards corporate openings than initially anticipated to take advantage of opportunities in Turkey and accelerate growth in Russia, with an associated increase in capital expenditure

· Russian commissary expansion completed, significantly extending capacity to service up to 250 stores across the region

Current Trading

System sales growth and like-for-like growth for the first two months of 2018 was as follows:

During the first two months of 2018, the Group opened net 2 stores (2017: 4). The Board is confident in the pipeline for the remainder of the year.

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

"DP Eurasia has had another successful year and we are pleased to report good progress in our maiden annual results since becoming a public company. We have seen strong performance in both of our geographical segments. Turkey and Russia had solid top line growth driven by our store additions and like-for-like growth. This top line growth translated into a significant increase in our adjusted EBITDA, where we also saw increases in the adjusted EBITDA margins as a percentage of system sales in Turkey and Russia.

"Our growth continues to be driven by our innovation in technology and products. In 2017, we revamped our iOS and Android apps in both Turkey and Russia, which resulted in increasing app conversion rates and app like-for-like growth significantly higher than the total online like-for-like growth. In Turkey our apps like for like increased from 56.8% to 112.6% and in Russia our apps like for like increased from 34.7% to 317.5%, In Turkey, we launched our loyalty program, which is already showing encouraging signs of order frequency increase. On the product side, we launched oven baked sandwiches, mosaic cakes and popcorn chicken in Turkey, and salads in Russia. In February, oven baked sandwich revenue mix was 14% in Turkey and is encouragingly creating incremental sales and not cannibalising pizza sales. We are also transferring menu items from Turkey to Russia, such as our ultra-thin crust and our newly launched mosaic cake.

"Our expansion in Russia outside of Greater Moscow is continuing to progress strongly. After opening stores in St Petersburg and Krasnodar in December 2017, we have also expanded into Rostov-on-Don in January 2018.

"We had a strong start to 2018 in line with our expectations with like-for-like growth of 10.7% and 25.0% in Turkey and Russia, respectively, and the Board remain confident in the business and its growth opportunities for the rest of the year. I would like to thank all our employees who have contributed to our strong results and look forward to another successful year."

Enquiries

A meeting for analysts will be held at 10.30am, 20 March 2018 at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN. A live audio webcast and conference call facility will be available.

DP Eurasia N.V.'s preliminary 2017 results and corporate presentation are available at www.dpeurasia.com. A webcast replay facility will be available after the analyst meeting via the same link.

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 and adjusted EBITDA are not defined by IFRS. Adjusted EBITDA excludes income and expenses which are not part of the normal course of business and are non-recurring items, consisting of restructuring costs, IPO-related expenses, and share based incentives. 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 Condensed 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 Condensed 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 3 in the Condensed 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.

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 643 stores (514 in Turkey, 121 in Russia, five in Azerbaijan and three in Georgia as at 31 December 2017), and operates through its owned corporate stores (37%) and franchised stores (63%). The Group maintains a strategic balance between corporate and franchised stores, establishing networks of corporate-owned 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 achieved strong operational growth in the year, with record store openings in Russia. The Group increased its system sales by 32.8% year-on-year, driven by a combination of like-for-like sales growth and store openings.

The Turkish operations' system sales, which represent 75% of Group system sales, increased by 14.2%. This increase was mainly driven by like-for-like sales growth. Positive customer sentiment in the second quarter of 2017 continued to improve in the second half of the year. Despite a slow start to the year with 3.5% like-for-like growth in the first quarter of 2017, the Turkish operations closed the year with 10.0% like-for-like growth. The strong like-for-like growth in the second half of the year was aided by the continued soft macroeconomic environment in the second half of 2016 stemming from the unsuccessful coup attempt in July 2016. Including Azerbaijan and Georgia, the Turkish segment added 27 stores during the year through splits and opening stores in previously unpenetrated areas. Active management and optimisation of the Turkish estate, which is ordinary course of business for the Group, continued in 2017. 20 stores were transferred from corporate to franchise, with an additional eight transfers in the opposite direction.

The Russian operations' system sales, which represent 24% of Group system sales, increased by 169.0% (95.0% based on RUB). This increase was driven primarily by like-for-like sales growth and store openings. The Russian operations achieved like-for-like sales growth of 28.9% for the period. The Group opened a record 49 stores in Russia, including its first stores outside of Greater Moscow in St Petersburg and Krasnodar. These new cities, along with further expansion into Rostov-on-Don in January 2018, will be served by the newly expanded Moscow commissary which has the capacity to service 250 stores. Russian franchise stores reached 22, increasing by 18 in 2017, and the number of franchise partners reached 13 in 2017 from four in 2016. In Russia, corporate to franchise transfers totalled four in 2017 with one transfer in the opposite direction.

Delivery Channel Mix and Online like-for-like growth

The following table shows the Group's delivery system sales, broken down 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), broken down by the Group's two largest countries in which it operates:

The Group's like-for-like growth has been driven mainly by the performance of its online ordering platforms. Online delivery system sales as a share of delivery system sales was 51.8% for the period. This represented a 9.4% increase compared to 2016.

In Turkey, online system sales like-for-like growth for the period was 37.7% as a result of which online delivery system sales as a share of delivery system sales reached 47.8% for the period, a 6.8% increase from 2016.

In Russia, online system sales like-for-like growth for the period was 78.5% as a result of which online delivery system sales as a share of delivery system sales reached 66.7% for the period, a 14.2% increase from 2016.

Online system sales continued to outpace the overall system sales growth at 72.2% for the Group. Turkish online system sales grew by 41.5%, while Russian online system sales grew by 245.5% (150.4% based on RUB).

Financial Review

Revenue

The Group revenue grew by 40.3% to TRY 633.0 million during the 12-month period. The Turkish segment revenue grew by 14.0% to TRY 425.7 million, while the Russian segment revenue grew by 166.8% to reach TRY 207.3 million.

Gross Profit

The Group gross profit increased by 36.6% to TRY 234.3 million during 2017. The main contributor to the growth in the gross profit was strong top line performance of the business. Gross margin as a percentage of system sales increased to 27.2% in 2017 from 26.5% in 2016.

Adjusted EBITDA

Management believes that adjusted EBITDA is the most relevant indicator of the Group's profitability at this stage of its development.

The Group's adjusted EBITDA grew by 28.9% to TRY 96.8 million. Both major segments of the Group were profitable from an adjusted EBITDA perspective. Adjusted EBITDA for the Turkish segment, which includes the Azerbaijani and Georgian businesses, was TRY 85.7 million, a year-on-year increase of 19.1%, and adjusted EBITDA for the Russian segment was TRY 12.5 million, a year-on-year increase of 296.5% (187.4% based on RUB). Additionally, costs relating to our Dutch corporate expenses (excluding those that relate to our initial public offering) reduced Adjusted EBITDA by TRY 1.3 million.

Adjusted EBITDA margin as a percentage of system sales for the Turkish segment increased to 13.1% from 12.6%. Adjusted EBITDA margin as a percentage of system sales for the Russian segment was 6.1%, an increase by 2% points compared to 2016.

For the year ended 31 December 2017, the Group's adjusted EBITDA margin as a percentage of system sales was 11.3%, a decrease of 0.3% points from 2016. This decrease is attributable to the Russian segment's increasing share in the total business of the Group and the expenses incurred as part of being a public company starting from the second half of 2017. Russia segment's share in Group system sales more than doubled in 2017, increasing to 23.9% from 11.8% in 2016.

Adjusted Net Income

For the year ended 31 December 2017, adjusted net income was down 39.4% to TRY 21.7 million from TRY 35.8 million. The reduction in adjusted net income was primarily driven by the movement of the Russian rouble against the Euro. While the Russian rouble appreciated against the Euro in 2016, it depreciated in 2017. As a result, the Group recorded foreign exchange losses of TRY 11.7 million in 2017 versus foreign exchange gains of TRY 12.0 million in 2016, a net swing of TRY 23.7 million year-on-year. Additionally, during the year depreciation and amortisation increased due to the growth in capital expenditures during 2017.

The adjustments that are included in the reconciliation of Net Income to Adjusted Net Income are IPO costs (2017: TRY 15.3 million, 2016: TRY 0.9 million), share based incentives (2017: TRY 1.5 million, 2016: TRY 5.7 million), and tax effect (2017: nil, 2016: TRY -0.2 million). The IPO costs and share based incentives along with the previously discussed Russian rouble volatility and increased depreciation and amortisation expense are also the main contributors to the change in profit before tax from 2016 to 2017.

Capital expenditure and Cash conversion

The Group incurred TRY 78.5 million of capital expenditures in 2017. The Turkish segment capital expenditures amounted to TRY 36.7 million and the Russian segment capital expenditures amounted to TRY 41.7 million (RUB 671 million).

The Group's capital expenditures were higher than management expectations in 2017 as management took advantage of additional growth opportunities. In the Turkish segment, the Group saw an opportunity to acquire some franchise stores and to open corporate stores. In the Russian segment, the Group opened additional corporate stores compared to the management guidance and built up its presence in areas more rapidly, in line with its 'castle strategy'.

The main elements of capital expenditure in Turkey were investments into corporate store openings, franchise store acquisitions, the online ordering platforms, store conversions to the Kaizen format and information technology; whereas in Russia, the Group invested primarily in corporate store openings, capacity expansion in the Moscow commissary, information technology and the new Moscow headquarters.

Cash conversion (defined as (adjusted EBITDA - capital expenditure)/adjusted EBITDA) for the year was 19.0% for the Group and 57.1% for the Turkish segment. The Russian segment had negative cash conversion as it is in a period of rapid expansion relative to its size.

Adjusted net debt and Leverage

The Group's adjusted net debt as at 31 December 2017 was TRY 106.7 million and it had gross borrowings of TRY 227.9 million, TRY 158.1 million of which was Euro-denominated. TRY 83.0 million of this amount is hedged via a Euro denominated long term cash deposit which a subsidiary within the Turkish segment holds as collateral on a borrowing of a subsidiary within the Russian segment and a Euro denominated cash deposit at the Company level.

The Group continues to monitor the Rouble interest rate developments with a view towards converting its Russian segment Euro exposure to Roubles.

The leverage ratio (defined as adjusted net debt/adjusted EBITDA) of the Group was 1.1x as of 31 December 2017 (2016: 1.9). The decrease in the leverage ratio was further helped by the primary proceeds the Group raised through its IPO.

Outlook

The management guidance for store openings and like-for-like growth for the medium term and capital expenditure for 2018 is as follows:

The management is raising its 2018 capital expenditure guidance in Turkey and Russia by TRY 8 million and RUB 75 million, respectively. The main drivers for this increase are the launch of a project to unify the online ordering back-end systems across the Group, GPS Tracker project's move from pilot phase to deployment phase and the weakness of TRY against the USD and EUR. The Group is targeting greater efficiencies and improved customer service through these projects.

Amsterdam, 20 March 2018

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

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.

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME 

FOR THE YEAR ENDED 31 DECEMBER 2017 (UNAUDITED) AND 2016

 (Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated

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

DP EURASIA N.V.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2017 (UNAUDITED)

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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

DP EURASIA N.V.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2017 (UNAUDITED)

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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

DP EURASIA N.V.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

FOR THE YEAR ENDED 31 DECEMBER 2017 (UNAUDITED)

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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

DP EURASIA N.V.

CONSOLIDATED STATEMENTS OF CASH FLOW 

FOR THE YEAR ENDED 31 DECEMBER 2017 (UNAUDITED)

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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

DP EURASIA N.V.

NOTES TO THE CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

AS AT 31 DECEMBER 2017 (UNAUDITED)

(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)

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 principal activity of the Company consists of acting as an investment company.

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

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

As at 31 December 2017, the Group operates in 643 stores (402 franchise stores, 241 company-owned stores) (31 December 2016: 567 stores (355 franchise stores, 212 company-owned stores).

The condensed consolidated financial statements attached do not constitute the full statutory financial statements of DP Eurasia N.V. and include preliminary unaudited numbers. The full financial statements are expected to be published in April.

Subsidiaries

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

The Group's effective ownership of the subsidiaries are as follows:

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

OOO Pizza Restaurants ("Domino's Russia") 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.

Fides Grup Gıda Restaurant İşletmeciliği A.Ş. and Pizza Restaurantları A.Ş. ("Fides Turkey" and "Domino's Turkey", respectively) are established in Turkey. Domino's Turkey is operating a pizza delivery network of company and franchise-owned stores in Turkey. Fides Turkey is an investment company, which has a Master Franchise Agreement (the "MFA Turkey") with Domino's Pizza International pizza delivery network in Turkey until 2032. The rights obtained under the MFA have been reassigned from Fides Turkey to Domino's Turkey in order for it to operate the pizza delivery network.

Fides Food Systems BV and Fidesrus BV ("Fides Food Systems" and "Fidesrus", respectively) are established in the Netherlands. Both Fides Food Systems and Fidesrus are acting as investment companies.

NOTE 2 - BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENT

2.1 Principles of consolidation

The condensed consolidated financial statements includes the parent company, DP Eurasia N.V. and its subsidiaries for the year ended at 31 December 2017. Subsidiaries are fully consolidated from the date on which control is transferred to the Company (the "Acquisition"). ation. Subsidiaries are fully consolidated from when control is transferred to the Company (the "Acquisition"). 18 October 2016 was the date of Acquisition and from this point forward the consolidated Group was formed. This occurred when the Company acquired the Fidesrus and Fides Foods and their subsidiaries. This was a transaction under common control.

Basis of Consolidation

The condensed 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.

The control is provided with influence on the activities of an entity's financial and operational policies in order to obtain economic benefit from those activities. 

Subsidiaries are companies over which the company has the power to control the financial and operating policies for the benefit of the Company, either (a) through the power to exercise more than 50% of the voting rights relating to shares in the companies as a result of ownership interest owned directly and indirectly by itself, or (b) although not having the power to exercise more than 50% of the ownership interest, and/or as a result of agreements by certain the company members and companies owned by them whereby the company exercises control over the ownership interest of the shares held by them; otherwise the power to exercise control over the financial and operating policies.

The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity.

The subsidiaries fully consolidated, the proportion of ownership interest and the effective interest of the Group in these subsidiaries as of 31 December 2017 are disclosed in Note 1.

NOTE 2 - BASIS OF PRESENTATION OF CONDENSED CONSOLIDATED FINANCIAL STATEMENT (Continued)

2.1 Principles of consolidation (Continued)

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

The statements of financial position and statements of income of the subsidiaries are consolidated on line-by-line basis and the carrying value of the investment held by the Company and its subsidiaries is netted off against the related shareholders' equity. Intercompany transactions and balances between the Company and its Subsidiaries are netted off during the consolidation. The cost of, and the dividends arising from, shares held by the Group in its subsidiaries are netted off from shareholders' equity and income for the period, respectively.

Consolidation of foreign subsidiaries

Subsidiaries are companies over which the company has the power to control the financial and operating policies for the benefit of the Company, either (a) through the power to exercise more than 50% of the voting rights relating to shares in the companies as a result of ownership interest owned directly and indirectly by itself, or (b) although not having the power to exercise more than 50% of the ownership interest, and/or as a result of agreements by certain the company members and companies owned by them whereby the company exercises control over the ownership interest of the shares held by them; otherwise the power to exercise control over the financial and operating policies.

Financial statements of subsidiaries operating in foreign countries are prepared in local currency in accordance with the legislation of the country 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 of the opening net assets of foreign undertakings and differences between the average and statement of financial position date rates 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 condensed consolidated financial statement are presented in TRY, which is the Group's presentation currency.

The business operations of the Group are organized and managed with respect to geographical positions of its operations. The information regarding the business activities of the Group as of31 December 2017 and 2016 comprise the performance and the management of Turkish and Russian operations and Head Office.

NOTE 3 - SEGMENT REPORTING

The segment analysis for the period ended 31 December 2017 and 2016 are as follows:

NOTE 3 - SEGMENT REPORTING (Continued)

The reconciliation of adjusted EBITDAs as of 31 December 2017 and 2016 is as follows:

(*) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS. 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-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.

NOTE 3 - SEGMENT REPORTING (Continued)

The reconciliation of adjusted net debt as of 31 December 2017 and 2016 is as follows:

(**) Net debt, adjusted net debt and non-recurring and non-trade items 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 to take into account deposits not otherwise considered cash and cash equivalents under IFRS.

The reconciliation of adjusted net income as of 31 December 2017 and 2016 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 6 - OTHER OPERATING INCOME AND EXPENSES

NOTE 7 - FINANCIAL INCOME AND EXPENSES

Financial expense

NOTE 8 - EARNINGS/(LOSS) PER SHARE

The reconciliation of adjusted earnings per share as of 31 December 2017 and 2016 is as follows:

(*) Please refer to Note 3.

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

The earning per share presented for the years ended 31 December 2017 is based on the issued share capital of DP Eurasia N.V. at the date of Acquisition (for further details, see Note 2).

NOTE 9 - PROPERTY AND EQUIPMENT