A jump in finance expenses wiped out pre-tax profits for DP Eurasia (DPEU) during the first half, offsetting an impressive rise in sales. The additional expenses resulted from interest rate increases in both Turkey and Russia, with around a third of the group’s bank borrowings denominated in Turkish lira and the remainder in roubles. Net debt increased due to the translation effect of the appreciation of the Russian rouble against the Turkish lira and an increase in capital expenditure. Chief strategy officer Selim Kender argued that the current leverage ratio of 1.9 times cash profits – up from a multiple of 1.6 in the prior year – was “prudent and conservative”.
System sales growth of more than a quarter over the period was driven mainly by store expansion in Russia, with growth in the country rising by almost two-thirds to ₺249m, but 4.7 per cent on an organic basis. It opened 64 stores overall, bringing the total to 736 locations, and is still aiming to open up to 95 stores by the year-end despite tough macroeconomic conditions in Turkey and increasing competition in Russia. Increased cost inflation pushed the company to raise prices in Turkey in order to preserve margins, which has so far not had a material impact on sales volumes. However, like-for-like sales growth in Russia has slowed due to increased competition in Moscow.
Bloomberg consensus forecasts EPS of 178 kuruş in 2019, increasing to 346 kuruş in 2020.
|DP EURASIA (DPEU)|
|ORD PRICE:||95p||MARKET VALUE:||£138m|
|TOUCH:||95-96p||12-MONTH HIGH:||135p||LOW: 75p|
|DIVIDEND YIELD:||nil||PE RATIO:||na|
|NET ASSET VALUE:||77 kuruş*||NET DEBT:||237%**|
|Half-year to 30 Jun||Turnover (₺m)||Pre-tax profit (₺m)||Earnings per share (₺)||Dividend per share (kuruş)|
|*Includes intangible assets of ₺97.1m, or 67 kuruş a share **Excludes lease liabilities of ₺245m £1=₺7.15|