During 2018, Turkey faced a currency crisis which saw the value of the lira dramatically deteriorate. This was bad for DP Eurasia (DPEU), owner of Domino's Pizza master franchises in Turkey (65 per cent of system sales), Russia (33 per cent), Azerbaijan and Georgia. The company, which reports in Turkish liras, reported 31 per cent growth in system sales, with like-for-like growth of 9.3 per cent in Turkey and 16 per cent in Russia. Adjusted cash profits were up 112 per cent to ₺111m (£15m), although a spiraling interest bill and a ₺19m currency hit pushed it to a pre-tax loss.
The impressive headline growth numbers came at a big cost. Capital expenditure of ₺79m was higher than management had expected as the group bought franchise stores and opened corporate stores; not the capital-light franchise-led expansion investors may be familiar with from London-listed Domino's UK and Ireland.
Ahead of the lira devaluation, DP Eurasia refinanced its debt from a euro-denominated to a rouble-denominated facility. High borrowing rates and higher debt (adjusted net debt rose 45 per cent to ₺155m) led to a near-90 per cent increase in net interest expenses in 2018. Interest cover dropped from 1.6 to a worryingly low 1.4 times. The group also finished the year with ₺24.2m cash tied up as collateral against the Russian borrowings.
Analysts at Liberum expect pre-tax profits of ₺51m during 2019, giving EPS of 28 kuruş, compared with ₺18.9m and seven kuruş.
| DP EURASIA (DPEU) | ||||
| ORD PRICE: | 85p | MARKET VALUE: | £124m | |
| TOUCH: | 85-87p | 12-MONTH HIGH: | 211p | LOW: 75p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 95 kuruş* | NET DEBT: | 135% | |
| Year to 31 Dec | Turnover (₺m) | Pre-tax profit (₺m) | Earnings per share (₺) | Dividend per share (kuruş) |
| 2014** | 319 | -14.1 | na | na |
| 2015** | 375 | -18.5 | na | na |
| 2016** | 451 | 38.3 | na | na |
| 2017*** | 626 | 0.7 | nil | na |
| 2018 | 857 | -3.9 | -0.08 | na |
| % change | +37 | -628 | - | - |
| Ex-div: | na | |||
| Payment: | na | |||
| *Includes ₺93.7m of intangible assets, or 64 kuruş per share *Pre-IPO figures ***Re-stated to reflect IFRS 15 accounting £1=₺7.36 | ||||
