Preliminary Results

RNS Number : 7495U

DP Eurasia N.V

02 April 2019

For Immediate Release

2 April 2019

DP Eurasia N.V.

("DP Eurasia" or the "Company", and together with its subsidiaries, the "Group")

Preliminary Results for the Year Ended 31 December 2018

Continued top line growth driven by strong online performance and network expansion

DP Eurasia (DPEU.L), the exclusive master franchisee of the Domino's Pizza brand in Turkey, Russia, Azerbaijan and Georgia, is pleased to announce its results for the year ended 31 December 2018, achieving continued operational and strategic progress across the Group.

Highlights

	For the year ended 31 December
	2018	Restated⁽⁸⁾ 2017	Change
	(in millions of TRY, unless otherwise indicated)

Number of stores	724	643	81

Group system sales ⁽¹⁾
Turkey	736.1	645.6	14.0%
Russia	373.5	205.4	81.8%
Azerbaijan & Georgia	15.7	8.7	80.2%
Total	1,125.3	859.8	30.9%

Group system sales like-for-like growth⁽²⁾
Turkey	9.3%	10.0%
Russia (based on RUB)	16.0%	28.9%

Revenue	856.9	626.5	36.8%
Turkey adjusted EBITDA⁽³⁾	96.5	80.9	19.4%
Russia adjusted EBITDA⁽³⁾	23.9	11.2	112.2%
Adjusted EBITDA⁽³⁾	110.6	90.8	21.8%
Adjusted net income ⁽⁴⁾	(6.7)	16.9	n.m
Adjusted net debt⁽⁵⁾	154.6	106.7	44.9%

Financial Highlights

· Group revenue and system sales up 36.8% and 30.9%, respectively, driven by both like-for-like growth and store openings

o Turkish system sales growth of 14.0%

o Russian system sales growth of 81.8% (48.7% based on RUB)

· Adjusted EBITDA margin as a percentage of system sales was 9.8%, with both regions delivering improved returns:

o Turkey adjusted EBITDA margin increased by 0.5% points to 12.8%

o Russia adjusted EBITDA margin increased by 0.9% points to 6.4%

· Adjusted EBITDA up 21.8% to TRY 110.6 million (2017: TRY 90.8 million) driven by strong sales growth despite the impact of increased Dutch corporate expenses of TRY 9.8 million (2017: TRY 1.3 million)

· Adjusted net income is a loss of TRY 6.7 million, affected by increased financial expense and FX loss

· All hard currency bank debt refinanced into local currency, predominantly in Russian Roubles

Operational Highlights

· Turkey and Russia like-for-like growth predominantly driven by the online ordering platforms - online delivery system sales as a share of delivery system sales reached 60.8% for the period (2017: 51.8%)

· All-time high of 81 new stores were added in the year, bringing the total number to 724

o Strong Russian store rollout with a record 58 additions

o 23 store openings in Turkey segment (including Azerbaijan and Georgia)

o Russian franchise store mix at 44%

· Responsive and progressive websites now live in Turkey and Russia

· First regional dough production facility operational in Yekaterinburg, Russia

Current Trading and Outlook

System sales growth and like-for-like growth for the first two months of 2019 were as follows:

Group system sales growth ⁽¹⁾	For the two months ended 28 February 2019
Turkey	5.0%
Russia	64.2%
Azerbaijan & Georgia	74.7%
Total	22.8%

Group system sales like-for-like growth⁽²⁾
Turkey	2.5%
Russia (based on RUB)	7.7%

During the first two months of 2019, the Group opened net three stores (2018: two). The Board is confident in the store opening pipeline for the remainder of the year, where we expect to open between 25 - 30 stores in Turkey and between 40-60 in Russia. We maintain our medium-term guidance for like-for-like growth to be high single digit in Turkey and low-to-mid teens in Russia. We expect to hit medium-term guidance in Turkey this year and we are already seeing an improving trend with like-for-like growth for the first three weeks of March 2019 at 8.4%; however, our expectation for Russia in 2019 is high single digit due to like-for-like growth rates averaging over 30% for the last four years and increased competition in Moscow. With the expanding overall pizza market and the newly opened regional stores entering the like-for-like basket, we are confident that Russia will revert to the medium-term guidance in 2020.

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

"We are pleased to report another successful year for 2018 despite the macroeconomic volatility we have faced in Turkey. Our performance continues to be strong in both of our main markets. Both Turkey and Russia recorded robust top-line growth accompanied by an increased adjusted EBITDA margin as a percentage of system sales. We've opened 81 stores, the most stores the Company has opened in a calendar year, and we've improved our Russian store opening pace for the fifth year in a row.

"Innovation, related to both our products and our technology, continues to be the main driver of our strong performance. We have recently introduced three new pizzas in Turkey, including the chocolate pizza, our first co-branded KitKat® chocolate pizza with Nestlé®, and Dopdolu, a meat-based value pizza. In Russia, we have introduced a new value pizza line as well as several side dishes, including wraps and new desserts. We launched our new websites in both Russia and Turkey as well as the GPS Tracker in Turkey. The new websites are materially increasing our conversion rates and the GPS Tracker has started to introduce labour cost efficiencies.

"Our regional and franchise expansion is continuing to develop in Russia. We are now operational in twelve cities across the country and have increased the number of our franchisee partners to 31.

"Year-to-date February 2019 started with a 2.5% like-for-like growth in Turkey, where the effects of the macroeconomic volatility impacted consumer spending. We continue to target margin preservation in Turkey. In Russia, like-for-like growth is at 7.7% for the same period. The Board expects the full-year adjusted EBITDA⁽³⁾ for 2019 to be in line with expectations, with cost control measures compensating for the lower like-for-like expectation in Russia. Cost control measures will include stricter food and labour cost control, headquarter streamlining and logistics productivity increases. Once again, I would like to thank our dedicated team across the Group who have been instrumental in delivering this strong set of results and I look forward to a successful 2019."

Enquiries

DP Eurasia N.V.
Selim Kender, Chief Strategy Officer & Head of Investor Relations	+90 212 280 9636

Buchanan (Financial Communications)
Richard Oldworth / Victoria Hayns / Madeleine Seacombe/ Tilly Abraham	+44 20 7466 5000 dp@buchanan.uk.com

A meeting for analysts will be held at 9.30am, 2 April 2019 at the offices of Buchanan, 107 Cheapside, London, EC2V 6DN. A conference call dial-in will be available via the details below.

Conference call:

UK Toll: +44 3333000804

UK Toll Free: 08003589473

Participant PIN code: 87324397#

URL for international dial in numbers: http://events.arkadin.com/ev/docs/NE_W2_TF_Events_International_Access_List.pdf

DP Eurasia N.V.'s preliminary 2018 results and corporate presentation are available at www.dpeurasia.com. A conference call replay will be available on the website in due course.

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, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS. These items are determined by the principles defined by the Group management and comprise income/expenses which are assumed by the Group management to not be 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. 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 15 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.

⁽⁸⁾ Restatement due to IFRS 15 adoption.

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 724 stores (535 in Turkey, 179 in Russia, six in Azerbaijan and four in Georgia as at 31 December 2018), and operates through its owned corporate stores (33%) and franchised stores (67%). The Group maintains a strategic balance between corporate and franchised stores, establishing networks of corporate 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

System Sales	For the year ended 31 December
	2018	2017	Change
	(in millions of TRY, unless otherwise indicated)

Group system sales⁽¹⁾
Turkey	736.1	645.6	14.0%
Russia	373.5	205.4	81.8%
Azerbaijan & Georgia	15.7	8.7	80.2%
Total	1,125.3	859.8	30.9%

Group system sales like-for-like growth⁽²⁾
Turkey	9.3%	10.0%
Russia (based on RUB)	16.0%	28.9%

Store Count	As at 31 December
	2018			2017
	Corporate	Franchised	Total	Corporate	Franchised	Total
Turkey	137	398	535	142	372	514
Russia	101	78	179	99	22	121
Azerbaijan	-	6	6	-	5	5
Georgia	-	4	4	-	3	3
Total	238	486	724	241	402	643

DP Eurasia achieved robust operational growth in the year, with an all-time high in the number of store openings for the Group and Russia. The Group increased its system sales by 30.9% year-on-year, driven by a combination of like-for-like sales growth and store openings.

The Turkish operations' system sales, which represent 65% of Group system sales, increased by 14.0%. This increase was mainly driven by like-for-like sales growth, despite the macroeconomic headwinds experienced in the second half of the year. Our main strategy in response to increased inflation in Turkey was to reflect the internal inflation that we experienced into our prices in an effort to preserve margins. Including Azerbaijan and Georgia, the Turkish segment added 23 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 2018. 24 stores were transferred from corporate to franchise ownership, with an additional eight transfers in the opposite direction.

The Russian operations' system sales, which represent 33% of Group system sales, increased by 81.8% (48.7% 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 16.0% for the period. The Group opened the most stores the Company has ever opened in a calendar year with 58 stores in Russia, continuing the regional expansion outside of Greater Moscow that it embarked on at the end of 2017. In addition to St Petersburg and Krasnodar, the Group has managed to successfully open stores in large Russian cities such as Rostov-on-Don, Voronezh, Samara, Kazan and Yekaterinburg. With the exception of Yekaterinburg, all the new cities are served by the Moscow commissary, which has the capacity to service 250 stores. The Group opened its first dough production facility in late 2018 to serve the Yekaterinburg stores. Russian franchise stores reached 78, increasing by 56 in 2018, and the number of franchise partners reached 31 in 2018 from 13 in 2017. In Russia, corporate to franchise transfers totalled 28 in 2018.

Delivery Channel Mix and Online like-for-like growth

The following table shows the Group's delivery system sales, analysed by ordering channel and by the Group's two largest countries in which it operates, as a percentage of delivery system sales:

		For the year ended 31 December
		2018			2017
		Turkey	Russia	Total	Turkey	Russia	Total
Store		42.4%	23.9%	37.1%	48.0%	33.3%	45.0%
Online	Group's online platform	30.2%	76.1%	44.7%	25.1%	66.7%	34.5%
	Aggregator	24.2%	-	16.1%	22.7%	-	17.3%
	Total online	54.4%	76.1%	60.8%	47.8%	66.7%	51.8%
Call centre		3.1%	-	2.1%	4.2%	-	3.2%
Total⁽⁶⁾		100%	100%	100%	100%	100%	100%

The following table shows the Group's online like-for-like growth⁽²⁾, analysed by the Group's two largest countries in which it operates:

	For the year ended 31 December
	2018	2017
Group online system sales like-for-like growth⁽²⁾⁽⁷⁾
Turkey	33.7%	37.7%
Russia (based on RUB)	43.5%	78.5%

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 60.8% for the period. This represented a 9.0 percentage point increase compared to 2017.

In Turkey, online system sales like-for-like growth for the period was 33.7%, as a result of which online delivery system sales as a share of delivery system sales reached 54.4% for the period, a 6.6 percentage point increase from 2017.

In Russia, online system sales like-for-like growth for the period was 43.5%, as a result of which online delivery system sales as a share of delivery system sales reached 76.1% for the period, a 9.4 percentage point increase from 2017.

Online system sales continued to outpace the overall system sales growth at 59.6% for the Group. Turkish online system sales grew by 36.4%, while Russian online system sales grew by 112.8% (74.0% based on RUB).

Financial Review

	For the year ended 31 December
	2018	Restated⁽⁸⁾ 2017	Change
	(in millions of TRY)

Revenue	856.9	626.5	36.8%
Cost of sales	(566.3)	(398.7)	42.0%
Gross Profit	290.6	227.8	27.6%
General administrative expenses	(136.1)	(108.7)	25.3%
Marketing and selling expenses	(104.3)	(82.6)	26.2%
Other operating expenses, net	3.1	(3.6)	n.m.
Operating profit	53.3	32.8	62.3%
Foreign exchange (losses)/gains	(18.8)	(11.7)	60.9%
Financial income	5.5	1.2	355.6%
Financial expense	(43.9)	(21.6)	103.0%
(Loss)/Profit before income tax	(3.9)	0.7	n.m.
Tax expense	(7.2)	(0.6)
(Loss)/Profit after tax	(11.1)	0.1	n.m.

Turkey adjusted EBITDA⁽³⁾	96.5	80.9	19.4%
Russia adjusted EBITDA⁽³⁾	23.9	11.2	112.2%
Adjusted EBITDA⁽³⁾	110.6	90.8	21.8%
Adjusted net income ⁽⁴⁾	(6.7)	16.9	n.m.
Adjusted net debt⁽⁵⁾	154.6	106.7	44.9%

Revenue

Group revenue grew by 36.8% to TRY 856.9 million during the twelve-month period. Turkish segment revenue grew by 15.2% to TRY 484.7 million, while Russian segment revenue grew by 80.8% to reach TRY 372.2 million.

Gross Profit

Group gross profit increased by 27.6% to TRY 290.6 million during 2018. 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 decreased to 25.8% in 2018 from 26.5% in 2017. The main reason for the decrease was the mix effect as Russia's portion in the system sales increased from 24% in 2017 to 33% in 2018.

Adjusted EBITDA

The Board maintains 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 21.8% to TRY 110.6 million. Adjusted EBITDA for the Turkish segment, which includes the Azerbaijani and Georgian businesses, was TRY 96.5 million, a year-on-year increase of 19.4%, and adjusted EBITDA for the Russian segment was TRY 23.9 million, a year-on-year increase of 112.2% (73.5% 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 9.8 million in 2018. The comparable adverse effect of this item was TRY 1.3 million in 2017 as the Group listed at the half year mark of 2017. 2018 also saw a devaluation of the Turkish Lira against the Euro and Pound Sterling, which are the main currencies of the Dutch corporate expenses.

In 2018, IFRS 15 became effective and the Group adopted the new standard using the full retrospective method and has restated comparatives for the 2017 financial year. The main accounting effect of IFRS 15 is that it required the Group to record opening fees from sub-franchisees over the life of the sub-franchisee contract whereas in the past the Group recorded these fees in the period that the sub-franchisee agreement was executed. The Group also applied the same methodology for the opening fees it pays the master franchisor with respect to its new stores. This new standard had an adverse effect of TRY 6.3 million and TRY 6.0 million for 2018 and 2017, respectively, on the Group's adjusted EBITDA.

For the year ended 31 December 2018, the Group's adjusted EBITDA margin as a percentage of system sales was 9.8% compared to 10.6% over the same period in 2017. The main reasons for the decrease were the increase in Dutch corporate expenses and the mix effect associated with the Russia segment becoming a larger part of the business. Adjusted EBITDA margin as a percentage of system sales for the Turkish (including Azerbaijan and Georgia as the revenues from these franchisees are booked at the Turkish subsidiaries) and Russian segments both increased compared to the previous year and were 12.8% (12.4% in 2017) and 6.4% (5.5% in 2017), respectively.

Adjusted Net Income

For the year ended 31 December 2018, adjusted net income was a loss of TRY 6.7 million. The reduction in adjusted net income was primarily driven by the movement of the Russian rouble against the Euro prior to the Group's refinancing of its Euro denominated bank loans in Russia with a Rouble facility and increased bank loan interest rates in both Turkey and Russia. As a result, the Group's foreign exchange loss increased to TRY 18.8 million from TRY 11.7 million and its financial expense increased to TRY 43.9 million from TRY 21.6 million. In the coming years, management expects foreign exchange results will be less volatile due to the fact that the Group no longer has any hard currency bank borrowings.

Capital expenditure and Cash conversion

The Group incurred TRY 79.0 million of capital expenditures in 2018. The Turkish segment capital expenditures amounted to TRY 36.8 million and the Russian segment capital expenditures amounted to TRY 42.2 million (RUB 555 million).

The Group's capital expenditures were higher than management expectations in 2018 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.

Cash conversion (defined as (adjusted EBITDA - capital expenditure)/adjusted EBITDA) for the year was 28.6% for the Group and 61.9% 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 2018 was TRY 154.6 million and it had gross borrowings of TRY 215.6 million. Following the refinancing of its Euro denominated loans in Russia with a Rouble denominated bank facility with a 9.7% fixed interest rate in July 2018, the Group does not carry any hard currency denominated loans on its balance sheet; 12.7% of the Group's gross borrowings is denominated in Turkish Liras and 87.3% is denominated in Roubles. In Turkey, bank loan interest rates peaked in the low 30% range in September following the onset of macroeconomic volatility. As a result, the Group made a conscious effort to minimize its bank loans in Turkey and the gross borrowings in the Turkish segment decreased to TRY 27.4 million as of 31 December 2018. Despite the interest rates decreasing to the low 20% range at the end of 2018, the Group is planning to continue its efforts to eliminate its TRY denominated borrowings fully in 2019.

The Group continues its prudent and conservative approach to debt and its leverage ratio (defined as adjusted net debt/adjusted EBITDA) of the Group was 1.4x as of 31 December 2018.

Outlook

The management guidance for store openings and like-for-like growth for the medium-term and capital expenditure for 2019 is as follows:

	Turkey	Russia
Net store openings per year	25 - 30	40 - 60
Annual like-for-like growth	High single digit	Low-to-mid teens
2019 capital expenditure	TRY 30 million	RUB 450 million

We maintain our medium-term guidance for like-for-like growth to be high single digit in Turkey and low-to-mid teens in Russia. We expect to hit medium-term guidance in Turkey this year and we are already seeing an improving trend with like-for-like growth for the first three weeks of March 2019 at 8.4%; however, our expectation for Russia in 2019 is high single digit due to like-for-like growth rates averaging over 30% for the last four years and increased competition in Moscow. With the expanding overall pizza market and the newly opened regional stores entering the like-for-like basket, we are confident that Russia will revert to the medium-term guidance in 2020.

Amsterdam, 2 April 2019

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

	For the year ended 31 December
	2018		2017
Currency	Period End	Period Average	Period End	Period Average
EUR/TRY	6.028	5.679	4.516	4.116
RUB/TRY	0.075	0.076	0.065	0.062
EUR/RUB	79.461	73.950	68.867	65.901

Delivery - Take away / Eat in mix

	For the year ended 31 December
	2018			2017
	Turkey	Russia	Total	Turkey	Russia	Total
Delivery	63.0%	60.2%	62.0%	63.0%	60.2%	62.2%
Take away / Eat in	37.0%	39.8%	38.0%	37.0%	39.8%	37.8%
Total⁽²⁾	100%	100%	100%	100%	100%	100%

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2018

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

			Restated (1)
	Notes	31 December 2018	31 December 2017

Revenue	4	856,874	626,469
Cost of sales	4	(566,250)	(398,717)

GROSS PROFIT	4	290,624	227,752

General administrative expenses		(136,145)	(108,654)
Marketing and selling expenses		(104,294)	(82,630)
Other operating income	6	10,466	3,807
Other operating expense	6	(7,361)	(7,444)

OPERATING PROFIT		53,290	32,831

Foreign exchange losses	7	(18,770)	(11,666)
Financial income	7	5,508	1,209
Financial expense	7	(43,927)	(21,636)

(LOSS)/ PROFIT BEFORE INCOME TAX		(3,899)	738

Tax expense	16	(7,194)	(646)
Income tax expense		(11,579)	(8,270)
Deferred tax income		4,385	7,624

RESULT FOR THE PERIOD		(11,093)	92

OTHER COMPREHENSIVE INCOME/ (EXPENSE)		10,013	(3,086)
Items that will not be reclassified
to profit or loss
- Remeasurements of post-employment
benefit obligations, net of tax		(291)	(266)

Items that may be reclassified
to profit or loss
- Currency translation differences		10,304	(2,820)

TOTAL COMPREHENSIVE LOSS		(1,080)	(2,994)

Earnings/(loss)per share (2)	8	(0.0763)	0.0012

(*) Prior year comparatives are restated following the implementation of IFRS 15.

(**) Amounts represent the basic and diluted earnings per share.

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2018

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

			Restated (*)	Restated (*)
ASSETS	Notes	31 December 2018	31 December 2017	1 January 2017

Trade receivables	12	20,761	14,949	9,611
Property and equipment	9	136,041	128,396	97,848
Intangible assets	10	48,514	40,331	34,043
Goodwill		45,195	44,209	43,560
Deferred tax assets	16	12,187	7,943	-
Other non-current assets	14	25,389	34,314	28,415

Non-current assets		288,087	270,142	213,477

Cash and cash equivalents	11	28,444	76,128	19,502
Trade receivables	12	69,959	65,236	54,676
Due from related parties		20	15	1,259
Inventories		77,619	56,259	42,025
Other current assets	14	45,584	28,113	22,260

Current assets		221,626	225,751	139,722

TOTAL ASSETS		509,713	495,893	353,199

(*) Prior year comparatives are restated following the implementation of IFRS 15.

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

			Restated (*)	Restated (*)
	Notes	31 December 2018	31 December 2017	1 January 2017

EQUITY

Paid in share capital		36,353	36,353	120
Share premium		119,286	119,286	63,757
Contribution from shareholders		20,697	18,183	16,666
Other comprehensive income/expense
not to be reclassified to profit or loss
- Remeasurements of post-employment
benefit obligations		(2,484)	(2,193)	(1,927)
Other comprehensive income/expense
to be reclassified to profit or loss
- Currency translation differences		(689)	(10,993)	(8,173)
Retained earnings		(34,714)	(23,623)	(23,715)

Total equity		138,449	137,013	46,728

Financial liabilities	15	171,276	85,753	80,594
Deferred tax liability	16	565	2,014	2,115
Other non-current liabilities	14	30,038	23,816	17,585

Non - current liabilities		201,879	111,583	100,294

LIABILITIES

Financial liabilities	15	44,330	142,152	118,907
Trade payables	12	74,148	60,070	39,356
Current income tax liabilities	16	6,971	2,181	2,317
Provisions		9,224	7,692	4,864
Other current liabilities	14	34,712	35,202	40,733

Current liabilities		169,385	247,297	206,177

TOTAL LIABILITIES		371,264	358,880	306,471

TOTAL LIABILITIES AND EQUITY		509,713	495,893	353,199

(*) Prior year comparatives are restated following the implementation of IFRS 15.

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

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2018

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

	Share capital	Share premium	Contribution from shareholders	Remeasurement of post-employment benefit obligations	Currency translation differences	Retained earnings	Total Equity

Previously reported	120	63,757	16,666	(1,927)	(8,081)	(11,062)	59,473

Impact from application of new IFRSs	-	-	-	-	(92)	(12,653)	(12,745)

Balances at 1 January 2017	120	63,757	16,666	(1,927)	(8,173)	(23,715)	46,728

Capital increased	4,994	89,138	-	-	-	-	94,132
Transfers	31,239	(31,239)	-	-	-	-	-
Remeasurements of post-employment benefit obligations, net	-	-	-	(266)	-	-	(266)
Currency translation adjustments	-	-	-	-	(2,820)	-	(2,820)
Total income for the period	-	-	-	-	-	92	92
Total comprehensive loss	-	-	-	(266)	(2,820)	92	(2,994)
Share-based incentive plans	-	-	1,517	-	-	-	1,517
Transaction costs: IPO	-	(2,370)	-	-	-	-	(2,370)
Balances at 31 December 2017	36,353	119,286	18,183	(2,193)	(10,993)	(23,623)	137,013
Balances at 1 January 2018	36,353	119,286	18,183	(2,193)	(10,993)	(23,623)	137,013

Remeasurements of post-employment benefit obligations, net	-	-	-	(291)	-	-	(291)
Currency translation adjustments	-	-	-	-	10,304	-	10,304
Total loss for the period	-	-	-	-	-	(11,093)	(11,093)
Total comprehensive loss	-	-	-	(291)	10,304	(11,093)	(1,080)
Share-based incentive plans	-	-	2,514	-	-	-	2,514
Balances at 31 December 2018	36,353	119,286	20,697	(2,484)	(689)	(34,716)	138,449

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

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2018

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

	Notes	2018	2017

(Loss)/profit before income tax		(3,899)	738

Adjustments for
Depreciation	9	37,018	29,274
Amortisation	10	16,250	11,850
Gains/(losses) on sale of property and equipment	6	(4,054)	1,445
Provision for performance bonus		7,408	5,576
Non-cash employee benefits expense -
Share-based payments		2,514	1,517
Interest income	7	(5,508)	(1,209)
Interest expense	7	41,512	20,565
Unrealised foreign exchange losses
on borrowings		11,473	10,400

Changes in operating assets and liabilities
Changes in trade receivables		(10,535)	(15,898)
Changes in other receivables and assets		(2,156)	(10,647)
Changes in inventories		(21,360)	(14,234)
Changes in contract assets		(1,650)	26
Changes in contract liabilities		8,722	6,135
Changes in trade payables		14,078	20,714
Changes in other payables and liabilities		(8,194)	(5,271)
Taxes paid	16	(6,788)	(8,406)
Performance bonuses paid		(5,876)	(3,244)

Cash flows generated from
operating activities		68,955	49,331

Purchases of property and equipment	9	(49,324)	(50,450)
Purchases of intangible assets	10	(24,036)	(17,891)
Disposals from sale of tangible and intangible assets		25,987	6,156

Cash flows used in investing activities		(47,373)	(62,185)

Interest paid		(37,353)	(18,283)
Interest received		5,508	1,209
Loans obtained		1,230,363	527,231
Loans paid	15	(1,275,472)	(528,511)
Financial lease payments		(10,653)	(8,325)
Transaction cost		-	(2,370)
Share capital/share premium		-	94,132
Cash flows (used in)/generated
from financing activities		(87,607)	65,083
Effect of currency translation differences		18,341	4,397
Net increase in cash and cash equivalents		(47,684)	56,626
Cash and cash equivalents at the
beginning of the period	11	76,128	19,502
Cash and cash equivalents at the
end of the period	11	28,444	76,128

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

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT 31 DECEMBER 2018

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

NOTE 1 - THE GROUP'S ORGANISATION AND NATURE OF ACTIVITIES

DP Eurasia N.V. (the "Company"), a public limited company, having its statutory seat in Amsterdam, the Netherlands, was incorporated under the law of the Netherlands on 18 October 2016. The Company has been incorporated by incorporating shares of Fides Food Systems Coöperatief U.A. and Vision Lovemark Coöperatief U.A. in Fidesrus B.V. and Fides Food Systems B.V. The acquisition occurred on
18 October 2016 when the Company acquired Fidesrus and Fides Foods and their subsidiaries and from this point forward consolidated Group was formed. This was a transaction under common control.

The consolidated financial statements of DP Eurasia N.V. have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union. The consolidated financial statements also comply with the financial reporting requirements included in Title 9 of Book 2 of the Dutch Civil Code, as far as applicable.

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

The management report within the meaning of Article 391 of Book 2 of the Dutch Civil Code consists of the following parts of the Annual Report:

• At a glance

• Highlights

• Key financial figures

• Message from CEO

• Strategic review

• Remuneration report

• Corporate governance report

• Risk and risk management

• Consolidated financial statements: Note 3 - Segment reporting

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

As at 31 December 2018, the Group operates in 724 stores (486 franchise stores, 238 Company-owned stores) (31 December 2017: 643 stores (402 franchise stores, 241 Company-owned stores).

The consolidated financial statements as at and for the period ended 31 December 2018 have been approved and authorised for issue on 1 April 2019 by authorisation of the Board of Directors. The financial statements are subject to adoption by the Annual General Meeting of Shareholders.

Subsidiaries

The Company has a total of five fully-owned subsidiaries. These entities and the nature of their business are as follows:

	2018	2017
	Effective	Effective
Subsidiaries	ownership (%)	ownership (%)	Registered country	Nature of business

Fides Grup Gıda Restaurant
İşletmeciliği A.Ş. ("Fides Turkey")	-	100	Turkey	Food delivery
Pizza Restaurantları A.Ş. ("Domino's Turkey")	100	100	Turkey	Food delivery
Pizza Restaurants LLC ("Domino's Russia")	100	100	Russia	Food delivery
Fidesrus B.V. ("Fidesrus")	100	100	The Netherlands	Investment company
Fides Food Systems B.V. ("Fides Food")	100	100	The Netherlands	Investment company

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 the 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 for the 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 Turkey has been merged with Domino's Turkey with all of its assets and liabilities as of 12 December 2018 through a tax-free legal merger.

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 THE CONSOLIDATED FINANCIAL STATEMENTS

2.1 Principles of consolidation

The consolidated financial statements include the parent company, DP Eurasia N.V. and its subsidiaries for the year ended at 31 December 2018. Subsidiaries are fully consolidated from the date on which control is transferred to the Company (the "Acquisition date").

Basis of consolidation

The consolidated financial statements include the accounts of the Group on the basis set out in the 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 all companies over which the group has control. The Group controls an entity when the group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power to direct the activities of the entity.

The subsidiaries fully consolidated, the proportion of ownership interest and the effective interest of the Group in these subsidiaries as of 31 December 2018 are disclosed in Note 1.

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 comprehensive income of the subsidiaries are consolidated on line-by-line basis and the carrying values of the investment held by the Company and its subsidiaries are eliminated against the related shareholders' equity. Intercompany transactions, balances and unrealised gains on transactions between Group companies are eliminated. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the transferred asset. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

Consolidation of foreign subsidiaries

Financial statements of subsidiaries operating in foreign countries are prepared in the currency of the primary economic environment 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 Lira, 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 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:

	31 December 2018		31 December 2017
	Period	Period	Period	Period
Currency	end	average	end	average

Euros	6.0280	5.6751	4.5155	4.1158

Russian Roubles	0.0753	0.0760	0.0650	0.0621

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 consolidated financial statements are presented in TRY, which is the Group's presentation currency.

NOTE 3 - SEGMENT REPORTING

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 of 31 December 2018 and 2017 comprise the performance and the management of its Turkish and Russian operations and head office.

The Group has two business segments, determined by management according to the information used for the evaluation of performance and the allocation of resources: the Turkish and Russian operations. Other operations are composed of corporate expenses of Dutch companies. These segments are managed separately because they are affected by the economic conditions and geographical positions in terms of risks and returns.

The segment analysis for the periods ended 31 December 2018 and 2017 are as follows:


1 January - 31 December 2018	Turkey		Russia		Other .	Elimination	Total
Corporate revenue	203,958		277,945		-	-	481,903
Franchise revenue and royalty	-		-		-	-
revenue obtained from franchisees	257,313		43,946		-	-	301,259
Other revenue	23,399		50,313		-	-	73,712
Total revenue	484,670		372,204		-	-	856,874
- At a point in time	482,490	371,543		-		-	854,033
- Over time	2,180	661		-		-	2,841
Operating profit	66,540		(3,173)		(10,077)	-	53,290
Capital expenditures	36,797		42,213		-	-	79,010
Tangible and intangible disposals	(7,317)		(14,616)		-	-	(21,933)
Depreciation and amortisation
expenses	(28,910)		(24,358)		-	-	(53,268)
31 December 2018	Turkey		Russia		Other	Elimination	Total
Borrowings
TRY	27,430		-		-	-	27,430
RUB	-		188,176		-	-	188,176
Total	27,430		188,176		-	-	215,606


1 January - 31 December 2017	Turkey	Russia	Other	Elimination	Total
Corporate revenue	183,473	187,197	-	-	370,670
Franchise revenue and royalty				-
revenue obtained from franchisees	218,261	8,363	-	-	226,624
Other revenue	18,882	10,292	-	-	29,174
Total revenue	420,616	205,852	-	-	626,468
- At a point in time	418,815	205,548	-	-	624,363
- Over time	1,801	304	-	-	2,105
Operating profit	51,736	(4,159)	(14,743)	-	32,834
Capital expenditures	36,740	41,739	-	-	78,479
Tangible and intangible disposals	(5,683)	(1,916)	-	-	(7,599)
Depreciation and amortisation				-
expenses	(27,106)	(14,017)	-	-	(41,123)
31 December 2017	Turkey	Russia	Other	Elimination	Total
Borrowings
TRY	56,439	-	-	-	56,439
EUR	29,576	128,521	-	-	158,097
RUB	-	13,369	-	-	13,369
Total	86,015	141,890	-	-	227,905

The reconciliation of adjusted EBITDA as of 31 December 2018 and 2017 is as follows:

Turkey	2018	2017

Adjusted EBITDA (*)	96,537	80,884
Non-recurring and non-trade
(income)/expenses
IPO costs	-	1,847
One-off non-trading costs	191	-
Share-based incentives	896	195

EBITDA	95,450	78,842

Depreciation and amortisation	(28,910)	(27,106)

Operating profit	66,540	51,736

Russia	2018	2017

Adjusted EBITDA (*)	23,853	11,243
Non-recurring and non-trade
(income)/expenses
IPO costs	-	-
One-off non-trading costs	1,051	63
Share-based incentives	1,618	1,322

EBITDA	21,185	9,858

Depreciation and amortisation	24,358	14,017

Operating loss	(3,173)	(4,159)

Other(*)	2018	2017

Adjusted EBITDA (**)	(9,810)	(1,333)
Non-recurring and non-trade
(income)/expenses
IPO costs	-	13,410
One-off non-trading costs	267	-

EBITDA	(10,077)	(14,743)

Depreciation and amortisation	-	-

Operating loss	(10,077)	(14,743)

(*) The Group has two business segments, determined by management according to the information used for the evaluation of performance and the allocation of resources: the Turkish and Russian operations. Other operations are composed of corporate expenses of Dutch companies. These segments are managed separately because they are affected by the economic conditions and geographical positions in terms of risks and returns.

(**) EBITDA, adjusted EBITDA and non-recurring and non-trade income/expenses are not defined by IFRS. These items are determined by the principles defined by the Group management and comprise income/expenses which are assumed by the Group management to not be 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.

The reconciliation of adjusted net income as of 31 December 2018 and 2017 is as follows:

	2018	2017

(Loss)/profit for the period as reported	(11,093)	92

Non-recurring and non-trade (income)/expenses
per Group management (*)

Share-based incentives	2,514	1,517
One-off expenses	1,840	-
IPO costs	-	15,320

Adjusted net (loss)/Profit for the period (**)	(6,739)	16,929

(**) 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.

The average head count for the Group is as follows:

31 December 2018	Netherlands	Turkey	Russia
Number of employees	3	2,286	1,816

31 December 2017	Netherlands	Turkey	Russia
Number of employees	3	2,415	1,632

NOTE 4 - REVENUE AND COST OF SALES

	2018	2017

Corporate revenue	481,903	370,670
Franchise revenue and royalty
revenue obtained from franchisees	301,259	226,625
Other revenue	73,712	29,174

Revenue	856,874	626,469

Cost of sales	(566,250)	(398,717)

Gross profit	290,624	227,752

Revenue recognised in relation to contract liabilities

The movements of performance obligations and revenue recognised in relation to contract liabilities for the years ended 31 December 2018 and 2017 are as follows:

	2018	2017
Impact due to the changes in IFRS 15	-	15,822
As of 1 January	21,983	15,822
Recognized as revenue	(2,841)	(2,105)
Increases due to new franchise agreements entered into	9,801	8,266
As of 31 December	28,943	21,983

Unsatisfied long-term franchisee contracts

The Group recognised net sales amounting to TRY 4,760 with respect to the performance obligations satisfied at a point in time for the year ended 31 December 2018 (31 December 2017: TRY 2,621).

The amount of performance obligations relating to ongoing contracts of the Group that will be recognized in the future is TRY 31,409. The Group expects that this amount will be recorded as revenue within 15 years.

NOTE 5 - EXPENSES BY NATURE

	2018	2017

Personnel expenses	(193,285)	(144,180)
Depreciation and amortization expenses	(53,268)	(41,124)

NOTE 6 - OTHER OPERATING INCOME AND EXPENSES

Other income	31 December 2018	31 December 2017

Gain from sale of property and equipment	6,354	496
Interest income arising from
sales with extended terms	1,748	906
Foreign exchange gains	1,651	1,016
Other	713	1,389

	10,466	3,807

Other expense	31 December 2018	31 December 2017

Foreign exchange losses	3,295	1,454
Losses from sale of property and equipment	2,300	1,941
Legal and other provision expenses	821	982
Other	945	3,067

	7,361	7,444

NOTE 7 - FINANCIAL INCOME AND EXPENSES

Foreign exchange losses	31 December 2018	31 December 2017

Foreign exchange losses, net	18,770	11,666

	18,770	11,666



Financial income	31 December 2018	31 December 2017

Interest income	5,508	1,209

	5,508	1,209


Financial expense	31 December 2018	31 December 2017

Interest expense	41,118	20,565
Other	2,809	1,071

	43,927	21,636

NOTE 8 - EARNINGS/(LOSS) PER SHARE

	31 December 2018	31 December 2017

Average number of shares existing during the period	145,372,414	74,565,655
Net (loss)/profit for the period attributable to
equity holders of the parent	(11,093)	92

Earnings per share	(0.0763)	0.0012

The reconciliation of adjusted earnings per share as of 31 December 2018 and 2017 is as follows:

	31 December 2018	31 December 2017

Average number of shares existing during the period	145,372,414	74,565,655
Net (loss)/profit for the period attributable to equity
holders of the parent	(11,093)	92

Non-recurring and non-trade expenses
per Group management (*)
IPO Costs	-	15,320
Share-based incentives	2,514	1,517
One-off expenses	1,507	-

Adjusted net (loss)/profit for the period
attributable to equity holders of the parent	(7,072)	16,929

Adjusted earnings per share (*)	(0.05)	0.23

(*) Please refer to Note 3 for non-GAAP items.

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

NOTE 9 - PROPERTY AND EQUIPMENT

	1 January 2018	Additions	Disposals	Transfers	Currency translation adjustments	31 December 2018

Cost
Machinery and equipment	42,094	16,209	(10,028)	1,882	5,511	55,668
Motor vehicles	25,831	5,651	(1,283)	-	2,764	32,963
Furniture and fixtures	58,646	12,609	(12,069)	2,652	271	62,109
Leasehold improvements	80,470	20,069	(15,169)	206	5,631	91,207
Construction in progress	7,240	437	-	(5,260)	607	3,024

	214,281	54,975	(38,549)	(520)	14,784	244,971

Accumulated depreciation
Machinery and equipment	(11,494)	(8,167)	2,988	-	(1,302)	(17,975)
Motor vehicles	(10,596)	(7,953)	1,143	-	(812)	(18,218)
Furniture and fixtures	(26,953)	(7,087)	6,261	-	(69)	(27,848)
Leasehold improvements	(36,842)	(13,812)	7,054	-	(1,289)	(44,889)

	(85,885)	(37,019)	17,446	-	(3,472)	(108,930)

Net book value	128,396					136,041

Depreciation expense of TRY 23,311 has been charged in cost of sales and TRY 13,708 has been charged in general administrative expenses.

	1 January 2017	Additions	Disposals	Transfers	Currency translation adjustments	31 December 2017

Cost
Machinery and equipment	25,517	12,415	(1,278)	2,273	3,167	42,094
Motor vehicles	15,076	10,138	(1,071)	-	1,688	25,831
Furniture and fixtures	50,942	11,430	(4,112)	226	160	58,646
Leasehold improvements	61,158	19,892	(5,143)	1,414	3,149	80,470
Construction in progress	5,767	6,713	(1,652)	(4,061)	473	7,240

	158,460	60,588	(13,256)	(148)	8,637	214,281

Accumulated depreciation
Machinery and equipment	(6,070)	(5,189)	454	-	(689)	(11,494)
Motor vehicles	(5,288)	(5,957)	1,104	-	(455)	(10,596)
Furniture and fixtures	(21,998)	(6,640)	1,723	-	(38)	(26,953)
Leasehold improvements	(27,256)	(11,488)	2,567	-	(665)	(36,842)

	(60,612)	(29,274)	5,848	-	(1,847)	(85,885)

Net book value	97,848					128,396

Depreciation expense of TRY 22,726 has been charged in cost of sales and TRY 6,548 has been charged in general administrative expenses.

At 31 December 2018 and 2017, leased assets included in the table above, where the Group is lessee under a finance lease are as follows:

	31 December 2018	31 December 2017

Vehicles	8,415	11,826
Accumulated depreciation	(7,953)	(5,957)

Net book value	462	5,869

The Group leases various vehicles and machinery and equipment under non-cancellable finance lease agreements. The lease terms are between three and five years.

Impairment test for tangible assets

In accordance with accounting policy, all property and equipment is initially recorded at cost and recorded at cost less accumulated depreciation and any accumulated impairment loss. The Group assesses its performance separately for each store and decides whether to cease operating a store by reference to its discounted cash flows. For the purpose of assessing impairment, the discounted cash flows, calculated based on the Group's revenue projections for five years, are compared to the carrying value of the stores. The Group has assessed the performance of its stores and has not identified any events or changes in circumstances indicating that the carrying amount may not be recoverable as of 31 December 2018.

NOTE 10 - INTANGIBLE ASSETS

	1 January 2018	Additions	Disposals	Currency translation adjustments	Transfers	31 December 2018

Cost
Key money	8,755	9,691	(1,852)	862	-	17,456
Computer software	31,502	14,344	(815)	22	520	45,573
Franchise contracts	48,485	-	-	-	-	48,485
	88,742	24,035	(2,667)	884	520	111,514

Accumulated amortisation
Key money	(2,001)	(4,974)	1,808	(175)	-	(5,342)
Computer software	(10,855)	(6,351)	28	-	-	(17,178)
Franchise contracts	(35,555)	(4,925)	-	-	-	(40,480)
	(48,411)	(16,250)	1,836	(175)	-	(63,000)

Net book value	40,331					48,514

Amortisation expense of TRY 10,189 has been charged in cost of sales and TRY 6,061 has been charged in general administrative expenses.

The Group does not have any intangible assets with an indefinite useful life.

	1 January 2017	Additions	Disposals	Currency translation adjustments	Transfers	31 December 2017

Cost
Key money	2,734	6,135	(152)	-	38	8,755
Computer software	19,502	11,756	(254)	388	110	31,502
Franchise contracts	48,485	-	-	-	-	48,485
	70,721	17,891	(406)	388	148	88,742

Accumulated amortisation
Key money	(1,320)	(811)	130	-	-	(2,001)
Computer software	(4,651)	(6,191)	83	(96)	-	(10,855)
Franchise contracts	(30,707)	(4,848)	-	-	-	(35,555)
	(36,678)	(11,850)	213	(96)	-	(48,411)

Net book value	34,043					40,331

Amortisation expense of TRY 6,660 has been charged in cost of sales and TRY 5,190 has been charged in general administrative expenses.

Franchise contracts

The Group has recognized franchise contracts resulting from a business combination on 26 January 2011 amounting to TRY 48,485 and accounted for them as intangible assets in its consolidated financial statements.

NOTE 11 - CASH AND CASH EQUIVALENTS

The details of cash and cash equivalents as of 31 December 2018 and 2017 are as follows:

	31 December 2018	31 December 2017

Cash	818	1,365
Banks	16,367	63,438
Credit card receivables (*)	11,259	11,325
	28,444	76,128

(*) Maturity term of credit card receivables are 30 days on average (31 December 2017:
30 days).

The detail functional currency of the banks is as below:

	31 December 2018	31 December 2017

TRY	8,914	7,664
RUB	5,425	967
EUR	1,638	54,807
Other	390	-
	16,367	63,438

NOTE 12 - TRADE RECEIVABLES AND PAYABLES

a) Short-term trade receivables

	31 December 2018	31 December 2017

Trade receivables	50,903	48,392
Post-dated cheques	19,148	17,041
Receivables from related parties	20	15

	70,071	65,448

Less: Unearned financial income	-	(105)
Less: Doubtful trade receivable	(92)	(92)
Short-term trade and other receivables, net	69,978	65,251

The average collection period for trade receivables is between 30 and 60 days (2018 and 2017: 30 and 60 days).

Movement of provision for doubtful receivables is as follows:

	2018	2017

1 January	92	141
(Collections)/current year charge	-	(49)

31 December	92	92

The Group applied IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivable based on historical losses. The Group analysed impact of IFRS 9 and concluded there is no material impact on the bad debt reserve booked. The Group also assessed whether the historic pattern would change materially in the future and expects no significant impact. The expected credit loss applied per aging bucket is shown as below;

Not due	0-30 days	31-90 days	91-180 days	181-360 days	Over 360 days
0.01%	0.10%	0.32%	0.46%	0.65%	1.24%

b) Long-term trade receivables

	31 December 2018	31 December 2017

Trade receivables	10,729	1,242
Post-dated cheques(*)	10,032	13,707

	20,761	14,949

(*) Post-dated cheques are the receivables from franchisees resulting from store openings.

c) Short-term trade and other payables

	31 December 2018	31 December 2017

Trade payables	70,635	57,297
Other payables	3,513	2,773

	74,148	60,070

The weighted average term of trade payables is less than three months. Short-term payables with no stated interest are measured at original invoice amount unless the effect of imputing interest is significant
(31 December 2018 and 2017: Less than three months).

NOTE 13 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

The details of receivables and payables from related parties as of 31 December 2018 and 2017 and transactions are as follows:

a) Key management compensation

	31 December 2018	31 December 2017

Short-term employee benefits	16,243	14,202
Share-based incentives	2,514	1,517

	18,757	15,719

There are no loans, advance payments or guarantees given to key management.

b) Board compensation


	Base			Annual	Long-term		Total
	salary	Benefits	Pension	bonus	incentives	Total	(local
	(TRY)	(TRY)	(TRY)	(TRY)	(TRY)	(TRY)	currency)
Executive Directors
Aslan Saranga	2,000,000	150,599	-	778,667	409,981	3,339,247	₺ 3,339,247
Frederieke Slot	566,140	130,212	200,414	-	-	896,765	€ 158,400
Non-Executive Directors
Peter Williams	957,765	-	-	-	-	957,765	€ 150,000
Tom Singer	434,764	-	-	-	-	443,764	€ 69,500
Seymur Tarı	-	-	-	-	-	-	-
İzzet Talu	-	-	-	-	-	-	-
Aksel Şahin	-	-	-	-	-	-	-


	31 December 2017
	Base			Annual	Long-term		Total
	salary	Benefits	Pension	bonus	incentives	Total	(local
	(TRY)	(TRY)	(TRY)	(TRY)	(TRY)	(TRY)	currency)
Executive Directors
Aslan Saranga	1,446,953	117,369	-	780,000	-	2,344,322	₺2,344,322
Frederieke Slot	217,711	67,110	77,708	-	-	362,529	€ 88,080
Non-Executive Directors
Peter Williams	367,380	-	-	-	-	367,380	£75,000
Tom Singer	140,405	-	-	-	-	140,405	£28,884
Seymur Tarı	-	-	-	-	-	-	-
İzzet Talu	-	-	-	-	-	-	-
Aksel Şahin	-	-	-	-	-	-	-

Notes to the table - methodology

Base salary

This represents the cash paid or receivable in respect of the financial year.

Benefits

This represents the taxable value of all benefits paid or receivable in respect of the relevant financial year. Aslan Saranga's benefits included private health cover, and company car. Frederieke Slot's benefits included medical disability allowance, mobility allowance and education, communication and IT allowances.

Pension

Aslan Saranga receives no pension provision; Frederieke Slot receives a pension allowance worth 36% of base salary.

Annual bonus

This represents the total bonus payable for the relevant financial year under the ADBP.

Long-term incentive

This column relates to the expense recognised for the LTIP awards during the period in accordance with IFRS. Please note that in the remuneration report on page 44, the value of vested LTIP awards is included in the remuneration table. Since no LTIP awards have been vested to Executive Directors during the period, this column has a zero figure in the remuneration report.

Local currency totals

Part of Aslan Saranga's remuneration and the whole of Frederieke Slot's remuneration is paid in Euros and Peter Williams' and Tom Singer's remuneration is wholly paid in Pound Sterling. Total amounts received by each individual in local currency are recorded in the final column of the above table. In the other columns of the table, remuneration has been converted into Turkish Lira for consistency with the financial statements.

NOTE 14 - OTHER RECEIVABLES, ASSETS AND LIABILITIES

Other current assets
	31 December 2018	31 December 2017	1 January 2017

Long term deposits for
loan guarantees (1)	24,195	-	-
Advance payments to suppliers	9,687	15,534	15,088
Prepaid rent expenses	3,912	3,804	1,644
Prepaid taxes and VAT receivable	3,177	2,951	2,016
Prepaid marketing expenses	2,018	951	966
Prepaid insurance expenses	945	708	593
Contract assets related to franchising contracts (2)	438	261	212
Other	1,212	3,904	1,741

Total	45,584	28,113	22,260

(1) In July 2018, the Group refinanced its Euro denominated loans in Russia with a Rouble denominated loan. The RUB 2.2 billion facility has a 76-month term with a twelve month grace period and carries an interest rate of 9.7%. The loan carries a TRY 31,643 (RUB 420 million) cash deposit condition that was made as collateral by the Russian operating company. Annual interest rate is 6%. The principal of TRY 31,643 is blocked until DPR completes its loan repayments. However, part of the principal amount can be withdrawn for future interest repayment.

(2) The Group incurs certain costs with DP International related to the set up of each franchise contract and IT systems used for recording of franchise revenue.

Other non-current assets
	31 December 2018	31 December 2017	1 January 2017

Long-term deposits for loan guarantees (*)	8,342	28,217	23,183
Prepaid marketing expenses	7,173	-	-
Deposits given	5,909	3,737	2,797
Contract assets related to franchising contracts (**)	3,936	2,360	2,435
Other	29	-	-

Total	25,389	34,314	28,415

Other current liabilities
	31 December 2018	31 December 2017	1 January 2017

Payable to personnel	6,970	5,236	3,599
Unused vacation liabilities	6,404	5,070	3,909
Taxes and funds payable	6,047	4,776	3,623
Contract liabilities from franchising contracts	5,727	2,276	1,806
Social security premiums payable	3,588	2,969	4,036
Advances received from franchisees	2,243	6,200	9,054
Volume rebate advances	942	3,856	11,562
Other expense accruals	2,791	4,819	3,144

Total	34,712	35,202	40,733

Other non-current liabilities
	31 December 2018	31 December 2017	1 January 2017

Contract liabilities from franchising contracts	27,599	22,328	16,663
Long-term provisions for
employee benefits	1,665	1,374	922
Other	774	114	-

Total	30,038	23,816	17,585

(*) In July 2018, the Group refinanced its Euro denominated loans in Russia with a Rouble denominated loan. The RUB 2.2 billion facility has a 76-month term with a 12-month grace period and carries an interest rate of 9.7%. The loan carries a 31,643 TRY (RUB 420 million) cash deposit condition that was made as collateral by the Russian operating company. Annual interest rate is 6%. The principal of TRY 31,643 is blocked until DPR completes its loan repayments. However, part of the principal amount can be withdrawn for future interest repayment.

(**) The Group incurs certain costs with DP International related to set up of each franchise contract and IT systems used for recording of franchise revenue.

NOTE 15 - FINANCIAL LIABILITIES

	31 December 2018		31 December 2017

Short-term bank borrowings		24,820	75,174

Short-term financial liabilities		24,820	75,174

Short-term portions of long-term borrowings		11,721	61,757
Short-term portions of long-term financial lease borrowings		7,789	5,221

Current portion of long-term financial liabilities		19,510	66,978

Total short-term financial liabilities		44,330	142,152

Long-term bank borrowings		161,600	74,545
Long-term financial lease borrowings		9,676	11,208

Long-term financial liabilities		171,276	85,753

Total financial liabilities		215,606	227,905

The summary information of short-term and long-term bank borrowings is as follows:

31 December 2018

Currency	Maturity	Interest rate (%)	Short-term	Long-term

RUB borrowings	2024	9.70	11,721	161,600
TRY borrowings	Revolving	24.71	24,820	-

			36,541	161,600

31 December 2017

Currency	Maturity	Interest rate (%)	Short-term	Long-term

EUR borrowings	2018- 2022	3.50 - 8.00	83,551	74,545
TRY borrowings	Revolving	16.00	53,380	-

			136,931	74,545

The redemption schedule of the borrowings as of 31 December 2018 and 2017 is as follows:

	31 December 2018	31 December 2017

To be paid in one year	36,541	136,931
To be paid between one and two years	19,044	48,080
To be paid between two and three years	25,404	26,465
To be paid between three years and more	117,152	-

	198,141	211,476

The loan agreement between Sberbank Moscow and Domino's Russia is subject to covenant clauses whereby Group, Turkish and Russian Divisions are required to meet certain ratios. The financial indicator of the Russian Division, which requires the ratio of financial debt to adjusted EBITDA for the relevant period should not be more than 11; Turkey Division: which requires the ratio of financial debt to adjusted EBITDA for the relevant period should not be more than 3; the Group : which requires the ratio of financial debt to adjusted EBITDA for the relevant period should not be more than 3.5; During the validity period hereof, the number of the restaurant chain (own and franchised) of the Turkish Division should be not less than 524 units as of the end of 2018; Annual level of the adjusted EBITDA of the Turkish Division should be not less than TRY 87 Million during 2018-2020.

Throughout the period the Group, Domino's Russia and Domino`s Turkey have met covenants clauses of Sberbank Moscow.

The details of the finance lease liabilities as of 31 December 2018 and 2017 are as follows:

	31 December 2018	31 December 2017

Total financial lease payments	25,209	26,651
Interest to be paid in upcoming years	(7,744)	(10,222)

	17,465	16,429

Financial lease liabilities to be paid in one year	7,789	5,221
Financial lease liabilities to be paid between one and two years	6,128	5,537
Financial lease liabilities to be paid between two and three years	3,548	5,671

	17,465	16,429

As of 31 December 2018 and 2017, net financial liabilities reconciliation is as follows:

	31 December 2018	31 December 2017

Cash and cash equivalents	28,444	76,128
Financial liabilities and lease to be paid in one year	(44,330)	(142,152)
Financial liabilities and lease to be paid in one to five years	(171,276)	(85,754)

	(187,162)	(151,778)

	31 December 2018	31 December 2017

Cash and cash equivalents	28,444	76,128
Financial liabilities and lease - fixed rate	(188,176)	(99,385)
Financial liabilities and lease - floating rate	(27,430)	(128,521)

	(187,162)	(151,778)

	31 December 2018		31 December 2017
	Carrying	Fair	Carrying	Fair
	value	value	value	value
Borrowings and
financial lease liabilities	215,606	279,082	227,905	226,429

Total	215,606	279,082	227,905	226,429

31 December 2018	Financial liabilities and lease to be paid in a year	Financial liabilities and lease to be paid in 1-5 years	Total

1 January
financial liabilities	(142,152)	(85,753)	(227,905)

Net cash flow effect, loans received	(993,883)	(236,480)	(1,230,363)
Net cash flow effect, loans paid	1,116,644	158,828	1,275,472
Net cash flow effect, leasing payments	15,192	4,054	19,246
Other non-cash transaction, leasing payment	(11,122)	(3,122)	(14,244)
Unrealised FX gain and loss	(1,568)	(9,904)	(11,472)
Interest on financial liabilities	(4,159)	-	(4,159)
Currency translation adjustments	(23,282)	1,101	(22,181)

31 December financial liabilities	(44,330)	(171,276)	(215,606)

31 December 2017	Financial liabilities and lease to be paid in a year	Financial liabilities and lease to be paid in 1-5 years	Total

1 January
financial liabilities	(118,907)	(80,594)	(199,501)
	(527,231)	-	(527,231)
Net cash flow effect, loans received	(527,231)	-	(527,231)
Net cash flow effect, loans paid	489,420	39,091	528,511
Net cash flow effect, leasing payments	6,472	1,853	8,325
Other non-cash transaction, leasing payment	(10,138)	-	(10,138)
Unrealised FX gain and loss	(1,409)	(8,991)	(10,400)
Interest on financial liabilities	(2,282)	-	(2,282)
Currency translation adjustments	21,923	(37,112)	(15,189)

31 December financial liabilities	(142,152)	(85,753)	(227,905)

The reconciliation of adjusted net debt as of 31 December 2018 and 2017 is as follows:

	2018	2017

Short-term bank borrowings	36,541	136,931
Short-term portions of
long-term financial lease borrowings	7,789	5,221
Long-term bank borrowings	161,600	74,545
Long-term financial lease borrowings	9,676	11,208

Total borrowings	215,606	227,905

Cash and cash equivalents (-)	(28,444)	(76,128)

Net debt	187,162	151,777

Non-recurring items
per Group management
Long-term deposit for loan guarantee	(32,537)	(28,217)
Adjusting delay in collection/payment
day coinciding on a weekend	-	(16,835)

Adjusted net debt (*)	154,625	106,725

(*) 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.

NOTE 16 - TAX ASSETS, LIABILITIES AND TAX EXPENSE

Corporate tax

The Group is subject to taxation in accordance with the tax regulations and the legislation effective in the countries in which the Group companies operate. Therefore, provision for taxes, as reflected in the consolidated financial statements, has been calculated on a separate-entity basis.

The Netherlands

Dutch tax legislation does not permit a Dutch parent company and its foreign subsidiaries to file a consolidated Dutch tax return. Dutch resident companies are taxed on their worldwide income for corporate income tax purposes at a statutory rate of 25%. No further taxes are payable on this profit unless the profit is distributed.

If certain conditions are met, income derived from foreign subsidiaries is tax exempted in the Netherlands under the rules of the Dutch participation exemption. However, certain costs such as acquisition costs are not deductible for Dutch corporate income tax purposes. Furthermore, in some cases the interest payable on loans to affiliated companies is non-deductible.

When income derived by a Dutch company is subject to taxation in the Netherlands as well as in other countries, generally avoidance of double taxation can be obtained under the extensive Dutch tax treaty network or under Dutch domestic law.

Dividend distributions are subject to 15% Dutch withholding tax. However, under the Netherlands' extensive tax treaty network, this rate can, in many cases, be significantly reduced if certain conditions are met.

Turkey

The Corporate Tax Law was amended by Law No, 5520, dated 13 June 2006. Most of the articles of the new Corporate Tax Law (No 5520) came into force on 1 January 2006. Corporate tax is payable at a rate of 22% (31 December 2017: 20%) on the total income of the Group after adjusting for certain disallowable expenses, exempt income and investment and other allowances (e.g. research and development allowance). No further tax is payable unless the profit is distributed (except for withholding tax at the rate of 19.8%, calculated on an exemption amount if an investment allowance is granted in the scope of Income Tax Law Temporary Article 61).

With the Law on Amendments to Certain Laws and Tax Laws and Decrees by the Courts dated
28 November 2017, the tax rate has been changed to 22% for corporate tax and advance tax of corporate earnings for the 2018, 2019 and 2020 taxation periods.

Companies are required to pay advance corporate tax quarterly at the rate of 20% on their corporate income in Turkey. Advance tax is payable by the 17^th of the second month following each calendar quarter end. Advance tax paid by corporations is credited against the annual corporate tax liability. If, despite offsetting, there remains a paid advance tax amount, it may be refunded or offset against other liabilities to the government.

Russia

Income taxes have been provided for in the consolidated financial statements in accordance with legislation enacted or substantively enacted by the end of the reporting period. The income tax charge comprises current tax and deferred tax and is recognised in profit or loss for the year, except if it is recognised in other comprehensive income or directly in equity because it relates to transactions that are also recognised, in the same or a different period, in other comprehensive income or directly in equity.

Current tax is the amount expected to be paid to, or recovered from, the taxation authorities in respect of taxable profits or losses for the current and prior periods. Taxable profits or losses are based on estimates if financial statements are authorised prior to filing relevant tax returns. Taxes other than on income are recorded within operating expenses.

Deferred income tax is provided using the balance sheet liability method for tax loss carry forwards and temporary differences arising between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes. In accordance with the initial recognition exemption, deferred taxes are not recorded for temporary differences on initial recognition of an asset or a liability in a transaction other than a business combination if the transaction, when initially recorded, affects neither accounting nor taxable profit. Deferred tax balances are measured at tax rates enacted or substantively enacted at the end of the reporting period, which are expected to apply to the period when the temporary differences will reverse, or the tax loss carry forwards will be utilised.

Corporate tax liability for the year consist of the following:

	2018	2017

Corporate tax calculated	11,579	8,270
Prepaid taxes	(4,608)	(6,089)

Tax liability	6,971	2,181

Tax income and expenses included in the statements of comprehensive income are as follows:

	2018	2017

Current period corporate tax expense	(11,579)	(8,270)
Deferred tax income / (expense)	4,385	7,624

Tax liability	(7,194)	(646)

The reconciliation of the tax expense in the statement of comprehensive income is as follows:

	2018	2017

Profit/(loss) before tax	(3,899)	738

Corporate tax at statutory rates (25%)	975	(185)
Disallowable expenses	(5,834)	(3,541)
Recognition of deferred tax in Russia	550	7,254
Unrecognized tax credit used to reduce current tax	(2,714)	(3,895)
Differences in tax rates	(323)	(101)
Other, net	152	(178)

Total tax expense	(7,194)	(646)

The breakdown of cumulative temporary differences and the resulting deferred income tax assets/liabilities at 31 December 2018 and 2017 using statutory tax rates are as follows:

	31 December 2018		31 December 2017
		Deferred tax		Deferred tax
	Temporary	assets/	Temporary	assets/
	differences	(liabilities)	differences	(liabilities)

Carry forward tax losses (*)	38,001	7,600	30,439	6,088
Property, equipment and intangible assets	(39,727)	(7,861)	(44,160)	(8,832)
Deferred revenue	28,943	6,367	21,983	4,397
Expense accruals	9,515	2,093	-	-
Bonus accruals	7,168	1,517	5,733	1,147
Unused vacation liabilities	2,663	586	2,386	477
Legal provisions	1,816	399	2,116	423
Provision for employee termination benefit	1,665	366	1,374	275
Other	3,220	554	9,777	1,954

Deferred income tax assets, net		11,622		5,929

(*) Consists of carry forward losses of Domino's Russia.

Deferred income tax assets recognition of Fidesrus

Deferred tax assets are reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred tax asset to be utilised. Various factors are considered to assess the probability of the future utilisation of deferred tax assets, including past operating results, operational plan, expiration of tax losses carried forward, and tax planning strategies. If actual results differ from these estimates or if these estimates must be adjusted in future periods, the financial position, results of operations and cash flows may be negatively affected. In the event that the assessment of future utilisation of deferred tax assets must be reduced, this reduction will be recognised in the statement of profit or loss.

Based on the change in the tax code in the Russian Federation after 31 December 2015, previously applied limitation on carry forward tax losses for a ten-year period has been abolished and any losses incurred since 2007 will be carried forward until fully recognised.

Domino's Russia recognizes tax assets for the tax losses carried forward to the extent that the realization of the related tax benefit through the future taxable profits is probable. Domino's Russia recognize deferred income tax assets arising from tax losses, tax discounts and other temporary differences with the estimates and assumptions relying on the Domino's Russia management's five-year business plan and potential growth opportunities in Russia.

Movement of the deferred tax for the year ended 31 December 2018 and 2017 is as follows:

	2018	2017

Balance at the beginning of the year	5,929	(2,115)

Charged to the statement of income	4,746	7,624
Currency translation difference	866	353
Charged to other comprehensive income	81	67

Balance at the end of the year	11,622	5,929

NOTE 17 - SUBSEQUENT EVENTS

DP Eurasia shareholder Fides Food Coop. sold 14,357,241 shares with the Unit Price GBP 1.05 as of
1 February 2019.

………………………

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