The momentum behind pizza delivery outfit DP Poland Plc (LON:DPP) is continuing to look tasty.
The AIM-quoted firm, which has the exclusive right to operate the Domino’s Pizza brand in Poland, opened its fiftieth store in the country.
Peter Shaw, chief executive, hailed the an event hailed as a major milestone.
DPP now has outlets in 21 cities: its first store opened in Warsaw in 2011.
From vision to reality
Shaw added the establishment of Domino's as a national brand in Poland is moving “from vision to reality."
“The key thing about this business is getting to critical mass,” he told Proactive.
“And getting to between 50-100 stores that’s where the business will really start singing.”
Pace quickens
DPP’s pace of store openings has quickened over the past twelve months.
Fifteen new outlets have already opened this year, compared to twelve in the previous period, and four more are under construction.
It is the fastest pace of opening to date, added Shaw.
“It’s an unprecedented speed of roll-out.
Footprint the key
“The name of the game is about driving sales and footprint. EBITDA [underlying profits] will follow.
“As you open new stores you have costs in those and most don’t hit break even for a little while,” he explained.
“It’s not a story of group EBITDA it’s about roll-out and sales growth.”
Strong Poland
Poland’s strong economic growth is helping DPP, he added.
The economy there is expected grow by more than 4% this year and the country is on the verge of being upgraded to ‘developed’ from ‘developing’.
And there is a lot more pizza to be sold, says Shaw.
“There are 43 towns and cities with a population of least 90,000, we are in 21.”
Of the 50 stores, 26 are corporately managed, two are under management contract and 22 are sub-franchised.
Shaw added that a second commissary is now fully operational and supplying a large proportion of stores with the potential to supply up to 150 stores.
Interim sales boost
New store openings were partially responsible for yet another jump in sales in the first half of 2017, during which DPP notched up its 18th and 19th consecutive quarters of total sales growth.
Total system sales, which include the ten new stores opened in the first half, increased by 50% year-on-year to PLN27mln (£4.4mln) (H1 2016: PLN18mln) for the six months to 30 June.
As is common for a rapidly expanding company, DPP saw its first half pre-tax loss widen to £1.08mln, up from a £0.94mln loss a year earlier.
More news stores expected next year
Next year, City analysts expect 20 more stores to be opened with around 15 of these being corporate stores and the remainder sub-franchises.
Raised £5.25mln at a premium
In order to keep up with the ‘accelerated store roll-out plan’, earlier this year DPP raised £5.25mln from investors.
Impressively, DPP raised the cash by issuing 12.2mln shares at a slight premium of 43p per share – no mean feat for an AIM-listed company.
As well as funding the roll-out of new stores DP Poland will also spend some of the cash to beef up its investment in marketing in order to accelerate revenue growth.
Brokers upbeat
In a note to clients following interims, Langton Capital's Mark Brumby repeated his view that "there is no obvious reason why Poland should not be host to 300+ DPP stores in due course."
City brokers predict that DPP's underlying loss will be around £1.3mln this year and £0.7mln in 2018, before swinging to a small underlying profit (EBITDA) in 2019.