Dp Poland Regulatory News (DPP)

DP Poland PLC ("DP Poland" or the "Company")

Interim results for the half year to 30 June 2015.

11 consecutive quarters of double digit like-for-like system sales growth. Improving corporate store and commissary performance. H1 Group EBITDA losses reduced.

DP Poland, through its wholly owned subsidiary DP Polska S.A., has the exclusive right to develop, operate and sub-franchise Domino's Pizza stores in Poland. There are currently 19 Domino's Pizza stores in Poland, across Warsaw and Krakow, 12 corporately managed and 7 sub-franchised.

Highlights

· 11 consecutive quarters of double digit like-for-like system sales1 growth, Q4 2012 - Q2 2015

· Total system sales1 PLN 11.4m H1 2015 vs PLN 9.3m H1 2014, excluding 3 stores closed in 2014, up 23%

· Total system sales1 PLN 11.4m H1 2015 vs PLN 10.1m H1 2014, including 3 stores closed in 2014, up 13%

· Maintaining strong like-for-likes2

o Like-for-like system sales1 (PLN) up 16%

o Like-for-like gross profit3 (PLN) up 27%

o Like-for-like order count4 up 15%

· Total stores5 EBITDA positive for each month January - June 2015

· Top 3 corporate stores averaged +£26k6 EBITDA each in H1 2015 vs +£7.5k6 each in H1 2014

· Oldest corporate store delivered EBITDA of +£29.5k6 in H1 2015

· Growing commissary contribution through sales royalties and food and non-food sales to sub-franchisees

· Group EBITDA7 losses reduced 40% H1 2015 (£773,591) 6 on H1 2014 (1,299,930) 8

· Fourth store opened in Krakow in late August 2015, first store to open in a third city in October 2015

· Sub-franchisee RHPP acquired its fifth store on 1 September 2015

· Double digit like-for-like system sales growth continued through July and August 2015, with +18% and +17% respectively

Peter Shaw, Chief Executive of DP Poland said:

"The continuing improvement in corporate store EBITDA performance, coupled with a growing contribution from sub-franchise sales royalties and commissary sales, plus a reduction in central expenditure has considerably reduced Group EBITDA7 losses in the first half, compared to the first half of last year.

On the back of continued improvement in store performance we have been focused this year on finding and negotiating new sites. Our fourth store in Krakow opened in late August and is performing well. In October we will be opening in a third Polish city, joining Warsaw and Krakow and we are targeting further store openings in additional cities by the year end.

I am delighted to announce the imminent opening of our new commissary, which will give us the capacity to supply fresh dough and ingredients to our expanding store estate across Poland, while positively impacting the cost of dough production, warehousing, order picking and goods handling. With an initial capacity to supply 50 stores, the new commissary will give us the option to expand production capacity further to supply up to 100 stores, with minimal additional capital outlay."

18 September 2015

1 System Sales - total retail sales including sales from corporate and sub-franchised stores

2 Like-for-like growth in PLN, matching trading periods for the same stores between 1 January and 30

June, 2014 and 1 January and 30 June, 2015

3 Sales minus food costs. This figure excludes sub-franchised stores

4 Order count for corporate and sub-franchised stores

5 Total stores include corporate and sub-franchised stores

6 Exchange rate average for H1 2015 - £1:PLN 5.65

7 Excluding non-cash and non-recurring items

8 Exchange rate average for H1 2014 - £1:PLN 5.11

9 Source Domino's Pizza International 2015

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Chief Executive's Review

Store Performance

H1 2015 delivered a further 2 quarters of double digit like-for-like2 systems sales1 growth, totalling 11 consecutive quarters of double digit growth since October 2012. Like-for-like system sales were up 16%, like-for-like gross profit3 up 27% and like-for-like order count4 up 15%, H1 2015 on H1 2014.

System sales were up 23% for H1 2015, compared to H1 2014, excluding the 3 stores that were closed in 2014. When including the 3 stores closed in 2014, system sales were up 13%.

Total store5 EBITDA has been positive month-on-month since October 2014.

Our top 3 corporate stores averaged +£26k6 EBITDA each for H1 2015 vs +£7.5k6 each in H1 2014. Our oldest corporate store delivered +£29.5k6 EBITDA for H1 2015.

Store roll-out

We have been focusing this year on finding and negotiating sites for new Domino's Pizza stores. We opened our fourth store in Krakow at the end of August 2015, which is performing ahead of expectations. In October 2015 we will be opening in a third city, joining Warsaw and Krakow. We are targeting store openings in additional cities before the year end.

Our franchisee RHPP acquired a fifth store in Warsaw on 1 September 2015, as part of our original agreement to give them the option to acquire two further specific corporate stores; we expect them to acquire the sixth store in the first half of next year. Our franchisee HLM are also looking at potential sites, for their third store.

Commissary

To date we have had a highly flexible commissary operation, working on a third party's premises and using their labour. We have now reached the production and supply volumes to make it more economic to open our own commissary, employing our own production and warehousing staff.

Our new commissary will start operating imminently, to supply all Domino's Pizza stores in Poland with fresh dough, ingredients, boxes and other supplies. Based in a logistics park we have constructed the commissary with efficient use of space and good access to the national road network.

With a total investment of less than £300k, approximately one third of which is funded by leasing, this is a capital-efficient step giving us an initial capacity to supply 50 stores, with the potential to extend dough production for up to 100 stores with a minimal additional capital outlay. We believe our new commissary will significantly benefit the bottom line, with improved costs of dough production, warehousing, order picking and goods handling inbound and outbound.

H1 2015 has seen marked improvements in our food costs as our negotiating power has been strengthened by growing order volumes, coupled with reductions in European food prices. The contribution of the commissary through sales to sub-franchised stores has to-date been ahead of expectations.

Group performance

We saw a 40% reduction in Group EBITDA7 losses H1 2015 (£773,591)6 on H1 2014 (£1,299,930)8.

For the first time we saw revenue minus direct costs turn positive, with H1 2015 delivering +£84,797, by comparison H1 2014 saw revenue minus direct costs deliver a loss of (£210,858).

As described in the Finance Director's report below the Group loss for the period was reduced by 44% (1,074,059)6 H1 2015 (1,927,091)8 H1 2014.

Online sales

Online sales continue to grow as a proportion of delivery sales, with 66% of delivery system sales ordered online in H1 2015 (H1 2014 58%). In Q1 2015 Poland had the fourth highest proportion of sales made online among Domino's markets worldwide9.

Making a sale online is more cost-efficient than a telephone sale because it does not require a customer service representative to take the order and it reduces the chance of human error on the part of the store team.

Marketing and innovation

We continue to drive sales through proven promotions and the introduction of new products. In the first half of this year we introduced the Hypnotica pizza created by our colleagues in The Netherlands, plus Sweet and Hot, our own recipe using our popular Mango Habanero sauce. The introduction of our Tortilla Wraps hot snack has proved popular, with its three alternative recipes: hot chicken, chicken and spinach and veggie.

Outlook and trading update

Looking to the second half of the year we achieved like-for-like system sales of +18% in July 2015 and 17% in August 2015, in spite of strong 2014 comparatives. During July and August consumer demand is typically lower, requiring us to particularly work hard to drive sales and maintain margin. As we move into the Autumn we expect to see order count grow as more of our customers choose to stay at home and order pizza.

I believe that we will continue to see the benefit from the buoyant consumer economy on our sales performance, but as the unemployment rate continues to fall we are likely to see a growing challenge to recruit team members, particularly drivers, with associated upward pressure on rates of pay. However I am optimistic that robust sales growth will more than compensate for a potential rise in store labour costs.

Our sub-franchisees continue to take a positive view of the potential of this market and I am confident that we will see more sub-franchised stores over the coming months.

Our further store roll-out represents an exciting next step in the growth of this business, but we must recognise the impact that new store openings will have on the bottom line before those stores hit breakeven. Our most recent store openings provide encouragement that these new stores will outperform our original store openings and, perhaps more encouraging still, our most established stores look set to deliver a very healthy level of Store EBITDA for 2015, supporting our original vision that the Polish consumer would come to love Domino's Pizza.

Peter Shaw

Chief Executive

18 September 2015

Finance Director's review

Growing System Sales

In H1 2015 we reached our eleventh consecutive quarter of double digit like-for-like system sales1 growth. We have managed to achieve this consistent growth while improving store gross margin. Our pricing strategy is driven by a profit motive rather than a pure volume growth motive and our sales and marketing activities are judged within specific Return on Marketing Investment parameters.

Procurement and pricing

Our procurement function has delivered savings across all aspects of the business, including food and non-food purchasing, store operations and capital expenditure across stores and commissary. This systematic approach to procurement gives us a good picture of company-wide purchasing and allows us to be competitive in our pricing, while maintaining healthy margins at the store level and a reasonable return on capital investments.

Growing contribution from commissary sales

The contribution from commissary sales in H1 2015 was above the Company's expectations as sub-franchised store sales volumes grew and food costs declined. Sales volumes were supported by our competitive pricing approach and food costs were improved by higher volumes, aiding negotiation, and deflation in European food costs. We have taken a flexible approach with our first sub-franchisees, helping them to establish commercially robust businesses, while delivering us a strong contribution through royalties and commissary sales as those businesses have grown and as their costs of sale have been reduced.

Store count

As of 30 June 2015 we had 18 Domino's Pizza stores in Poland, 12 corporately owned and managed and 6 sub-franchised. In late August we opened our fourth corporate store in Krakow and on 1 September we sold 1 corporate store to RHPP. As of 18 September 2015 we had 19 stores, 12 corporate and 7 sub-franchised.

In October we will open in a third city, joining Warsaw and Krakow. We anticipate opening a number of further stores by the year end, in current and new cities.

Sales Key Performance Indicators

Growth in like-for-like2 (L-F-L) system sales was supported by strong growth in order count. Delivery online sales continue to grow, a more cost-efficient means of making a sale.

*Constant exchange rate of PLN 5.65:£1

Group performance

With a third of our stores now sub-franchised those former corporate store sales dropped out of the revenue line and were replaced by commissary sales plus sales royalties, hence the drop in revenue H1 2015 on H1 2014. System sales, including both corporate and sub-franchised store sales, have shown healthy growth at 23%, excluding 3 stores closed in 2014. The marked improvement in Group EBITDA7 is driven by the continuing improvement in store EBITDA, the growing contribution from the commissary, including sub-franchised sales royalties, plus a reduction in Selling, General and Administrative Expenses.

*Actual exchange rates for H1 2015 and H1 2014

Group loss for the period

Group loss for the period reduced significantly, in line with Group EBITDA7 and also on account of 2 loss making store closures accounted for in H1 2014.

* Actual exchange rates for H1 2015 and H1 2014

** Pre-exceptional items H1 2014

Exceptional items

In H1 2014 two poorly performing stores were closed, giving rise to exceptional impairment costs of £194,803 relating to plant and equipment which could not be deployed elsewhere and an onerous lease provision of £126,055.

Exchange rates

Financial Statements for our Polish subsidiary DP Polska S.A. are denominated in zloties (PLN) and translated to sterling (£). Under IFRS the Profit and Loss Account for the Group has been converted from PLN at the average half-a-year exchange rate applicable to PLN against £. The balance sheet has been converted from PLN to £ at the 30 June 2015 exchange rate applicable to PLN against £. In H1 2015 the PLN weakened against £.

Cash position

Cash has reduced by 25.8% from 1 January 2015, with the net cash at 30th June 2015 being £3.3m. Early in the second half of the year, July 2015, the Company completed a placing of 34,810,126 new ordinary shares, raising £5.5m before expenses.

We have committed to opening further stores in the second half of 2015, which will require cash to fit out as well as to fund those stores during their initial loss-making period.

*Actual exchange rates as at 31 Dec 2014 and 30 June 2015

New reporting format

The franchising of a third of our estate in November 2014 meant that the sales generated by those stores dropped out of our revenue line and our commissary transitioned from being a cost centre servicing corporate stores to a profit centre selling goods to sub-franchisees and collecting sub-franchised store sales royalties.

This change has prompted us to re-work our statutory profit and loss account, the IFRS Income Statement that was originally set up for corporate stores only. In the layout of this statement we have decided to adopt a direct and indirect cost approach. Direct costs are sometimes referred to as the "real" costs of doing business, whereas indirect costs go beyond the costs associated with running corporate stores and the commissary. We believe that this approach will better explain performance of the business.

The definitions of Revenue, Direct Costs and Indirect Costs used in this IFRS Income Statement have been set out below.

Revenues include corporate store sales and commissary sales to sub-franchisees, plus royalties on sub-franchised store sales.

Direct Costs represent the costs of operating our corporate stores, plus the cost of supplying franchised stores from our commissary, these direct costs include:

· Corporate stores: food costs, store labour, store rent, utilities, Local Store Marketing (leaflets and local activity) royalty fees, one-off store pre-opening costs (excluding store depreciation and amortization)

· Commissary: cost of goods sold, utilities, production and warehousing labour, warehousing and production rent (excluding commissary depreciation and amortization)

· Distribution expenses: from the commissary to corporate and franchised stores, either third party or in -house.

Indirect Costs: Selling, General & Administrative Expenses (SG&A) represent the general overhead costs of the business including:

· Brand Building Fund - central marketing support, generating awareness and sales

· Central costs of the Polish head office, the UK AIM listed parent company, the commissary office, commissary non-warehousing and non-production costs (excluding depreciation and amortization).

While all marketing costs might be expected to be presented in SG&A, we have decided to retain Local Store Marketing costs within Direct Costs, because we believe that stores cannot properly function without leaflets and local stores marketing activity

Maciej Jania

Finance Director

18 September 2015