2019 Results

RNS Number : 7920H

DP Eurasia N.V

27 March 2020

For Immediate Release

27 March 2020

DP Eurasia N.V.

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

Results for the Year Ended 31 December 2019

Significant online growth drives resilient performance

Highlights

	For the year ended 31 December
	2019	2018	Change
	(in millions of TRY, unless otherwise indicated)

Number of stores	765	724	41

Group system sales ⁽¹⁾
Group	1,370.3	1,125.3	21.8%
Turkey	845.7	736.1	14.9%
Russia	503.3	373.5	34.8%
Azerbaijan & Georgia	21.2	15.7	34.8%

Group system sales like-for-like growth⁽²⁾
Group⁽⁸⁾	10.7%	10.3%
Turkey	13.1%	9.3%
Russia (based on RUB)	0.7%	16.0%

Group revenue	980.2	856.9	14.4%
Group adjusted EBITDA⁽³⁾ (excl. IFRS 16)	124.5	110.6	12.6%
Group adjusted net income ⁽⁴⁾ (excl. IFRS 16)	2.9	(7.1)	n.m.
Group adjusted net debt⁽⁵⁾ (excl. IFRS 16)	226.5	154.6
Group adjusted EBITDA⁽³⁾	189.8	110.6	n.m.
Group adjusted net loss⁽⁴⁾	(6.3)	(7.1)	n.m.
Turkey adjusted EBITDA⁽³⁾	134.6	96.5	n.m.
Turkey adjusted EBITDA⁽³⁾ (excl. IFRS 16)	108.7	96.5	12.6%
Russia adjusted EBITDA⁽³⁾	63.9	23.9	n.m.
Russia adjusted EBITDA⁽³⁾ (excl. IFRS 16)	24.5	23.9	2.7%

Financial Highlights

· Group revenue up 14.4% and system sales up 21.8%, driven by like-for-like growth and store openings

o Turkish systems sales growth of 14.9%

o Russian system sales growth of 34.8% (17.5% based on RUB)

· Adjusted EBITDA (excl. IFRS 16) up 12.6% to TRY 124.5 million (2018: TRY 110.6 million)

· Adjusted net income (excl. IFRS 16) of TRY 3.2 million versus an adjusted net loss of TRY 7.1 million in 2018

Operational Highlights

· 41 new stores were added over the last 12 months, bringing the total number to 765

· Turkey and Russia continue to leverage online ordering; share of delivery system sales reached 70% for the year (2018: 61%)

· Group online system sales⁽⁷⁾ growth of 39.8%

o Turkish online system sales⁽⁷⁾ growth of 33.5%

o Russian online system sales⁽⁷⁾ growth of 49.0% (29.9% based on RUB)

· Management appointments completed in Russia and strategies to improve performance are already being implemented

Current Trading

System sales growth and like-for-like growth for the first two months of 2020 were as follows:

Group system sales growth⁽¹⁾	For the two months ended 29 February 2020
Group	21.7%
Turkey	26.1%
Russia	14.2%
Azerbaijan & Georgia	40.5%

Group system sales like-for-like growth⁽²⁾
Group⁽⁸⁾	13.9%
Turkey	21.2%
Russia (based on RUB)	-10.4%

The robust like-for-like growth in Turkey experienced in Q4'2019 has continued into the current year. The Group is focused on addressing the issues and challenges in Russia, including appointing new management and adopting a new marketing strategy. In Russia, the Group's advertising spend was materially higher in the first half of 2019 compared to its budgeted advertising expenses for the same period in 2020, as management is budgeting a flatter profile of advertising through the current year, and plans to use celebrity endorsement, a different channel mix, and simpler, price-led advertisements. This year will be a year of transition in Russia in which the Group will focus on getting the new team established and strengthening the operating model, whilst also adapting its strategic approach.

Outlook

Whilst the Group remains comfortable with its medium-term financial guidance, the Board is mindful of the considerable current uncertainty surrounding the spread of the COVID-19 outbreak and its impact on the business and wider economy in the countries in which the Group operates. Therefore, the Board is not in a position to provide meaningful guidance on the likely financial and operating results for the current year.

The Board believes that certain features of the Group's business may help it withstand the adverse impact of the pandemic including the essential nature of food services to consumers, its focus on delivery to customers, the growing reluctance of customers to leave their homes to dine out or buy groceries for fear of contracting the virus, and the affordable nature of the product at a time when domestic budgets may be under pressure. In the year to date, the pandemic has had a relatively small impact on the business with the exception of a reduction in dine in business in our Turkish restaurants (although our delivery and take out operations continue as normal).

There is no indication whether governmental measures will have an effect in preventing a further spread of the disease around the world and therefore the duration of the pandemic. If the pandemic and its impact on the business last for a protracted period, it is likely to have a more detrimental effect on the financial performance of the Group. The Group has taken proactive measures to ensure that its customers and employees continue to be safe and has established an internal task force to ensure that the supply chain is managed, critical inventory is available, and restaurants remain adequately staffed. The Group appreciates that the Turkish government has indicated its preparedness to support companies and encourage banks to maintain access to credit facilities so as to assist the corporate sector manage through the crisis and maintain employment.

The Board is closely monitoring the potential impact of the pandemic on the Group, particularly with regard to the wellbeing of our colleagues and customers, has a comprehensive contingency plan in place and will further update the financial market in due course.

The Russia Plan

The Group is implementing a detailed plan to address the challenges in the Russian market and continues to take proactive steps, including:

i. hiring a new management team comprising CEO, COO and CFO;

ii. making long term improvements to product, service and technology and further investment in the brand;

iii. adopting a new marketing strategy making use of celebrity endorsement, cluster-based pricing, different channel mix, and simpler, price-led advertisements;

iv. launching new products at entry level pricing;

v. creating regional castles - starting with the Krasnodar area in the south;

vi. expanding the use of corporate stores as well as franchise stores on to the aggregator platform; and

vii. cost cutting measures.

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

"On behalf of the Board, I am pleased to report another year of solid growth in 2019. We continued to grow our store portfolio, adding 41 stores during 2019 and reaching a total of 765 stores across our four countries of operations.

"The Turkish business performed strongly in 2019 despite macro headwinds and posted a rising performance in each successive quarter. Due to the recovery in macro parameters, the strong momentum has continued in Turkey into Q1 2020.

"In Russia, we successfully resolved certain issues with regional franchisees by acquiring and converting their stores to corporate stores. The challenge in Russia in terms of like-for-like growth in 2019 was mainly attributable to record advertising spend by online aggregators fighting for market dominance and increasing delivery fast food competition through the aggregators. We have completed the appointment of our Russian management team and launched a new marketing strategy in Russia with effect from the end of February to address the new market dynamics.

"We continue to focus on product innovation to drive growth; a key element of the Group's success to date. Following our introduction of the co-branded KitKat® chocolate pizza and "Dürümos" wrap, we introduced four additional types of oven-baked sandwiches in Turkey. We have relaunched the wrap and the pizza Quadro (rectangular pizza) at attractive entry level prices in Russia. Additionally, we will start trialling the loyalty programme in Russia during 2020.

"Digital continues to drive our business forward with significant growth achieved in both of our markets. Online ordering as a percentage of delivery has reached 70% across the Group, an increase of more than nine percentage points from 2018, with the Russian business exceeding 80%.

"The Board is closely monitoring the potential impact of the COVID-19 pandemic on the Group, particularly with regard to the wellbeing of our colleagues and customers. It has a comprehensive contingency plan in place and will further update the financial market in due course."

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 / Tilly Abraham	+44 20 7466 5000 dp@buchanan.uk.com

A conference call will be held at 9.30am (GMT) on 27 March 2020 for analysts and investors via the following dial-in details:

Conference call:

UK Toll: +44 3333000804

UK Toll Free: 08003589473

Participant PIN code: 32473974#

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 2019 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 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 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 16 in the 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⁾ Group like-for-like growth is a weighted average of the country like-for-like growths based on store numbers as described in Note (2) above.

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 765 stores (550 in Turkey, 203 in Russia, eight in Azerbaijan and four in Georgia as at 31 December 2019), and operates through its owned corporate stores (32%) and franchised stores (68%). 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
	2019	2018	Change
	(in millions of TRY, unless otherwise indicated)

Group system sales ⁽¹⁾
Group	1,370.3	1,125.3	21.8%
Turkey	845.7	736.1	14.9%
Russia	503.3	373.5	34.8%
Azerbaijan & Georgia	21.2	15.7	34.8%

Group system sales like-for-like growth⁽²⁾
Group⁽⁸⁾	10.7%	10.3%
Turkey	13.1%	9.3%
Russia (based on RUB)	0.7%	16.0%

Store Count	As at 31 December
	2019			2018
	Corporate	Franchised	Total	Corporate	Franchised	Total
Turkey	123	427	550	137	398	535
Russia	121	82	203	101	78	179
Azerbaijan	-	8	8	-	6	6
Georgia	-	4	4	-	4	4
Total	244	521	765	238	486	724

DP Eurasia achieved strong operational growth in the year, with a further 41 stores added to the store portfolio. The Group increased its system sales by 21.8% year-on-year, driven by a combination of like-for-like sales growth and store openings.

The Turkish operations' system sales, representing 62% of Group system sales, increased by 14.9%. Despite the slow start to the year due to the lingering effects of the 2018 macro volatility, the Group achieved 13.1% like-for-like growth in Turkey, mainly attributable to the strategies that were undertaken in sales and marketing. The "Dürümos" wrap launch, celebrity endorsed advertising campaigns and cluster-based pricing combined with the rapidly improving macroeconomic parameters in the second half of the year drove growth. As a result of the volatile situation in the first half of the year, a total of 17 stores were opened in the Turkish segment. Active management and optimisation of the Turkish estate, which is ordinary course of business for the Group, continued in 2019. 26 stores were transferred from corporate to franchisee ownership, with an additional eight transfers in the opposite direction.

The Russian operations' system sales, representing 37% of Group system sales, increased by 34.8% (17.5% based on RUB). This increase was driven primarily by store openings. The Russian operations achieved like-for-like sales growth of 0.7% for the year, with growth affected by the increased competition especially in terms of aggregators and fast food players that are supported by them. The Group intends to replicate the success it had turning around like-for-like growth in Turkey in early 2019 by deploying similar strategies in Russia in 2020, including celebrity endorsed advertising campaigns and cluster-based pricing. The regional franchisee disagreements were resolved with the Group acquiring a majority of the stores in the regions. A total of 22 stores were acquired in Russia during 2019, while the Group continued its refranchising efforts with 20 stores transferred from corporate to franchisee ownership. Russian franchised stores amounted to 82, representing 40% of the Russian store portfolio.

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
		2019			2018
		Turkey	Russia	Total	Turkey	Russia	Total
Store		32.0%	18.0%	27.8%	42.4%	23.9%	37.1%
Online	Group's online platform	28.5%	80.5%	47.0%	30.2%	76.1%	44.7%
	Aggregator	35.7%	1.5%	22.8%	24.2%	-	16.1%
	Total online	64.2%	82.0%	69.9%	54.4%	76.1%	60.8%
Call centre		3.8%	-	2.3%	3.1%	-	2.1%
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
	2019	2018
Group online system sales like-for-like growth⁽²⁾⁽⁷⁾
Group⁽⁸⁾	29.3%	35.4%
Turkey	32.6%	33.7%
Russia (based on RUB)	15.4%	43.5%

The Group's like-for-like growth continues to be driven mainly by the performance of its online ordering platforms. Online delivery system sales as a share of delivery system sales reached 70% for the year, which represents a 9.1 percentage point increase on a year-on-year basis.

In Turkey, online system sales like-for-like growth for the period was 32.6%, as a result of which online delivery system sales as a share of delivery system sales reached 64.2% for the period, a 9.8 percentage point increase from a year ago, aided also by an increase in volumes through the aggregator.

In Russia, online system sales like-for-like growth for the period was 15.4%, as a result of which online delivery system sales as a share of delivery system sales reached 82.0% for the period, a 5.9 percentage point increase from a year ago.

Online system sales continued to outpace the overall system sales growth at 39.8% for the Group. Turkish online system sales grew by 33.5%, while Russian online system sales grew by 49.0% (29.9% based on RUB).

Financial Review

	For the year ended 31 December
	2019	2018	Change
	(in millions of TRY)

Revenue	980.2	856.9	14.4%
Cost of sales (excl. IFRS 16)	(645.7)	(566.3)	14.0%
Gross Profit (excl. IFRS 16)	334.5	290.6	15.1%
General administrative expenses (excl. IFRS 16)	(154.0)	(136.1)	13.1%
Marketing and selling expenses	(137.0)	(104.3)	31.4%
Other operating expenses, net (excl. IFRS 16)	15.1	3.1	385.9%
Operating profit (excl. IFRS 16)	58.5	53.3	9.8%
Foreign exchange (losses)/gains (excl. IFRS 16)	6.8	(18.8)	n.m.
Financial income (excl. IFRS 16)	2.4	5.5	(57.0)%
Financial expense (excl. IFRS 16)	(49.3)	(43.9)	12.4%
(Loss)/Profit before income tax (excl. IFRS 16)	18.4	(3.9)	n.m.
Tax expense (excl. IFRS 16)	(14.8)	(7.2)	105.1%
(Loss)/Profit after tax (excl. IFRS 16)	3.6	(11.1)	n.m.

Group adjusted EBITDA⁽³⁾ (excl. IFRS 16)	124.5	110.6	12.6%
Group adjusted net income ⁽⁴⁾ (excl. IFRS 16)	2.9	(7.1)	n.m.
Group adjusted net debt⁽⁵⁾ (excl. IFRS 16)	226.5	154.6
Group adjusted EBITDA⁽³⁾	189.8	110.6	n.m.
Group adjusted net loss ⁽⁴⁾	(6.3)	(7.1)	n.m.
Turkey adjusted EBITDA⁽³⁾	134.6	96.5	n.m.
Turkey adjusted EBITDA⁽³⁾ (excl. IFRS 16)	108.7	96.5	12.6%
Russia adjusted EBITDA⁽³⁾	63.9	23.9	n.m.
Russia adjusted EBITDA⁽³⁾ (excl. IFRS 16)	24.5	23.9	2.7%

Revenue

Group revenue grew by 14.4% to TRY 980.2 million. Turkish segment revenue grew by 15.4% to TRY 559.3 million, while Russian segment revenue grew by 13.1% to reach TRY 420.9 million.

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 has adopted IFRS 16 from 1 January 2019 but has not restated comparatives for the 2018 reporting period, as permitted under the specific transition provisions in the standard, the Group has applied the modified retrospective method for adoption. As such, the Board believes that analysing the adjusted EBITDA (excluding IFRS 16) serves as a better comparative for the prior period.

The Group's adjusted EBITDA (excluding IFRS 16) grew by 12.6% to TRY 124.5 million. Adjusted EBITDA (excluding IFRS 16) for the Turkish segment, which includes the Azerbaijani and Georgian businesses, was TRY 108.7 million, a year-on-year increase of 12.6%, and adjusted EBITDA (excluding IFRS 16) for the Russian segment was TRY 24.5 million, a year-on-year increase of 2.7% (a decrease of 10.3% 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 8.7 million in 2019. The comparable adverse effect of this item was TRY 9.8 million in 2018.

In 2019, the Group's adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales was 9.1% compared to 9.8% in 2018. The main reasons for the decrease were the reduction in the Russian segment margin and the mix effect associated with the Russia segment becoming a larger part of the business.

Adjusted EBITDA (excluding IFRS 16) margin as a percentage of system sales for the Turkish segment (including Azerbaijan and Georgia) recorded an immaterial decrease to 12.5% from 12.8% as the Group was successful in preserving margins.

The Russian segment margin decreased to 4.9% from 6.4%. The main reason for the decrease is the lower like-for-like growth in Russia due to increased competition and the longer than expected ramp up times in regional stores. The Group changed its beverage supplier in Q3 2019 and began testing on one of the aggregator platforms in Q4 2019, where it is generating incremental sales. The Board continues to remain confident in the medium- and long-term potential of the Russian market for DP Eurasia.

Adjusted Net Income

For the year ended 31 December 2019, adjusted net income (excluding IFRS 16) was TRY 2.9 million. The increased financial expenses (excluding IFRS 16) were offset by the increase in operating profit (excluding IFRS 16). The increase in tax expense (excluding IFRS 16) was more than offset by the increase in foreign exchange gains (excluding IFRS 16), resulting in a positive adjusted net income (excluding IFRS 16). Despite not having any hard currency denominated loans, the Group recorded a foreign exchange gain of TRY 6.8 million due to the intragroup loans made from Turkey to Russia versus a foreign exchange loss of TRY 18.8 million in the previous year.

Capital expenditure and Cash conversion

The Group incurred TRY 106.8 million of capital expenditure in 2019. The Turkish segment capital expenditure was TRY 37.2 million and the Russian segment capital expenditures amounted to TRY 69.6 million (RUB 800 million). The Russian segment capital expenditure was higher than previous guidance due to the acquisition of franchised stores in the regions.

Cash conversion, defined as (adjusted EBITDA (excluding IFRS 16)- capital expenditure)/adjusted EBITDA (excluding IFRS 16)) for the period was 14.2% (2018: 28.5%) for the Group and 65.8% (2018: 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

Excluding the impact of IFRS 16, the Group's adjusted net debt at 31 December 2019 was TRY 226.5 million. Following the refinancing of its Euro denominated loans in Russia with a Rouble denominated bank facility in 2018, the Group does not carry any hard currency denominated loans on its balance sheet. In 2019, the Group switched a portion of its Rouble denominated bank loans to Turkish Lira denominated bank loans to align the currency of its bank loans more closely with the currency breakdown of its EBITDA. As a result, at 31 December 2019, 52% of the Group's bank borrowings were denominated in Turkish Liras, compared to 13% a year ago, while the remainder is denominated in Roubles.

The Group continues its prudent and conservative approach to debt and its leverage ratio (defined as adjusted net debt (excluding IFRS 16)/adjusted EBITDA (excluding IFRS 16)) was 1.8x as at 31 December 2019 (2018: 1.4x).

The main reasons for the increase in the Group's indebtedness were the unusually high interest rates in Turkey during the first three quarters of 2019, RUB's appreciation against the TRY and the extra capital expenditure incurred for the acquisition of the regional franchised stores. Currently, more than 90% of the Group's Turkish Lira denominated bank loans have fixed interest rates for 2020 as the Group looks to take advantage of the relatively lower interest rates currently available.

Amsterdam, 26 March 2020

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
	2019		2018
Currency	Period End	Period Average	Period End	Period Average
EUR/TRY	6.651	6.348	6.028	5.679
RUB/TRY	0.096	0.087	0.075	0.076
EUR/RUB	69.341	72.513	79.461	73.950

Delivery - Take away / Eat in mix

	For the year ended 31 December
	2019			2018
	Turkey	Russia	Total	Turkey	Russia	Total
Delivery	63.8%	62.2%	63.1%	63.0%	60.2%	62.0%
Take away / Eat in	36.2%	37.8%	36.9%	37.0%	39.8%	38.0%
Total⁽²⁾	100%	100%	100%	100%	100%	100%

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31 DECEMBER 2019 AND 2018

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

	Notes	31 December 2019	31 December 2018


Revenue	4	980,208	856,874
Cost of sales	4	(636,466)	(566,250)

GROSS PROFIT		343,742	290,624

General administrative expenses		(150,175)	(136,145)
Marketing and selling expenses		(137,043)	(104,294)
Other operating income	6	22,411	10,466
Other operating expense	6	(7,869)	(7,361)

OPERATING PROFIT		71,066	53,290

Foreign exchange income/(losses)	7	4,665	(18,770)
Financial income	7	16,100	5,508
Financial expense	7	(85,103)	(43,927)

PROFIT/(LOSS) BEFORE INCOME TAX		6,728	(3,899)

Income tax expense	21	(12,344)	(7,194)

LOSS FOR THE PERIOD		(5,616)	(11,093)

OTHER COMPREHENSIVE EXPENSE/INCOME		(21,708)	10,015
Items that will not be reclassified
to profit or loss
- Remeasurements of post-employment
benefit obligations, net of tax		(107)	(291)

Items that may be reclassified
to profit or loss
- Currency translation differences		(21,601)	10,306

TOTAL COMPREHENSIVE LOSS		(27,324)	(1,078)

Loss per share (*)		(0.0386)	(0.0763)

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

The accompanying notes, which are in abridged form, form an integral part of these consolidated financial statements. Please refer to the Group's Annual Report and Accounts for the full notes.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AT 31 DECEMBER 2019

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

ASSETS	Notes	31 December 2019	31 December 2018

Trade receivables	14	23,422	20,761
Lease receivables	17	39,568	-
Right-of-use assets	11	180,236	-
Property and equipment	9	160,043	136,041
Intangible assets	10	81,424	48,514
Goodwill	12	47,133	45,195
Deferred tax assets	21	18,060	12,187
Other non-current assets	17	35,903	25,389

Non-current assets		585,789	288,087

Cash and cash equivalents	13	70,928	28,444
Trade receivables	14	114,493	69,979
Lease receivables	17	16,618	-
Inventories	16	70,062	77,619
Other current assets	17	65,247	45,584

Current assets		337,348	221,626

TOTAL ASSETS		923,137	509,713

The accompanying notes, which are in abridged form, form an integral part of these consolidated financial statements. Please refer to the Group's Annual Report and Accounts for the full notes.

	Notes	31 December 2019	31 December 2018

EQUITY

Paid in share capital	23	36,353	36,353
Share premium		119,286	119,286
Contribution from shareholders		19,970	20,697
Other reserves
not to be reclassified to profit or loss
- Remeasurements of post-employment
benefit obligations		(2,591)	(2,484)
Other reserves
to be reclassified to profit or loss
- Currency translation differences		(22,288)	(687)
Retained earnings		(40,332)	(34,716)

Total equity		110,398	138,449
LIABILITIES
Financial liabilities	18	153,159	161,600
Lease liabilities	18	184,708	9,676
Long term provisions for
employee benefits	17	2,051	1,665
Deferred tax liability	21	-	565
Other non-current liabilities	17	37,041	28,373

Non - current liabilities		376,959	201,879

Financial liabilities	18	164,854	36,541
Lease liabilities	18	71,427	7,789
Trade payables	14	121,178	74,148
Current income tax liabilities	21	8,955	6,971
Provisions	19	5,354	1,816
Other current liabilities	17	64,012	42,120

Current liabilities		435,780	169,385

TOTAL LIABILITIES		812,739	371,264

TOTAL LIABILITIES & EQUITY		923,137	509,713

The accompanying notes, which are in abridged form, form an integral part of these consolidated financial statements. Please refer to the Group's Annual Report and Accounts for the full notes.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31 DECEMBER 2019

(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

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)
Total loss for the period	-	-	-	-	-	(11,093)	(11,093)
Currency translation adjustments	-	-	-	-	10,306	-	10,306
Total comprehensive loss	-	-	-	(291)	10,306	(11,093)	(1,078)
Share-based incentive plans (Note 22)	-	-	2,514	-	-	-	2,514

Balances at 31 December 2018	36,353	119,286	20,697	(2,484)	(687)	(34,716)	138,449

Balances at 1 January 2019	36,353	119,286	20,697	(2,484)	(687)	(34,716)	138,449

Remeasurements of post-employment benefit obligations, net	-	-	-	(107)	-	-	(107)
Currency translation adjustments	-	-	-	-	(21,601)	-	(21,601)
Total loss for the period	-	-	-	-	-	(5,616)	(5,616)
Total comprehensive loss	-	-	-	(107)	(21,601)	(5,616)	(27,324)
Cancellation of Share-based incentive (Note 22)	-	-	(2,729)	-	-	-	(2,729)
Share-based incentive plans (Note 22)	-	-	2,002	-	-	-	2,002

Balances at 31 December 2019	36,353	119,286	19,970	(2,591)	(22,288)	(40,332)	110,398

The accompanying notes, which are in abridged form, form an integral part of these consolidated financial statements. Please refer to the Group's Annual Report and Accounts for the full notes.

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31 DECEMBER 2019

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

	Notes	2019	2018

Profit/(Loss) before income tax		6,728	(3,899)

Adjustments for:
Depreciation	9-11	94,746	37,018
Amortisation	10	21,960	16,250
Gains on sale of property and equipment	6	11	(4,054)
Performance bonus accrual		4,562	7,408
Non-cash employee benefits expense -
share based payments	22	(727)	2,514
Interest income	7	(16,100)	(5,508)
Interest expense	7	78,506	41,512
Unrealised foreign exchange losses
on borrowings		-	11,473
Changes in operating assets and liabilities
Changes in trade receivables		(52,348)	(10,535)
Changes in other receivables and assets		(23,794)	(2,156)
Changes in inventories		7,557	(21,360)
Changes in contract assets		(294)	(1,650)
Changes in contract liabilities		4,246	8,722
Changes in trade payables		47,030	14,078
Changes in other payables and liabilities		27,010	(8,194)
Income taxes paid	21	(15,918)	(6,788)
Performance bonuses paid		(7,009)	(5,876)

Cash flows generated from
operating activities		176,166	68,955

Purchases of property and equipment	9	(54,715)	(49,324)
Purchases of intangible assets	10	(48,228)	(24,036)
Disposals from sale of tangible and intangible assets		15,039	25,987

Cash flows used in investing activities		(87,904)	(47,373)
Interest paid		(40,255)	(37,353)
Interest on leases paid		(22,031)	-
Interest received		1,837	5,508
Loans obtained		165,233	59,848
Loans paid	18	(85,453)	(104,957)
Payment of lease liabilities	18	(60,875)	(10,653)

Cash flows (used in)
from financing activities		(41,544)	(87,607)

Effect of currency translation differences		(4,234)	18,341

Net increase in cash and cash equivalents		42,484	(47,684)

Cash and cash equivalents at the
beginning of the period	12	28,444	76,128

Cash and cash equivalents at the
end of the period	12	70,928	28,444

The accompanying notes, which are in abridged form, form an integral part of these consolidated financial statements. Please refer to the Group's Annual Report and Accounts for the full notes.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

AS AT 31 DECEMBER 2019

(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. Upon incorporation Fides Food Systems Coöperatief U.A. and Vision Lovemark Coöperatief U.A. contributed and transferred all shares in Fidesrus B.V. and Fides Food Systems B.V. and their subsidiaries to the Company. From this point forward, the 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

• How we manage risk

• Consolidated financial statements: Note 3 - Segment Reporting

• Consolidated financial statements: Note 24 - Financial Instruments and financial risk management

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

As at 31 December 2019, the Group holds franchise operating and sub-franchising right in 765 stores (521 franchise stores, 244 corporate-owned stores) (31 December 2018: 724 stores (486 franchise stores, 238 corporate-owned stores).

The consolidated financial statements as at and for the period ended 31 December 2019 have been approved and authorized for issue on 23 March 2020 by authorisation of the Board. The financial statements are subject to adoption by the Annual General Meeting.

Subsidiaries

The Company has a total of four fully owned subsidiaries. These entities and nature of their business is as follows:

	2019	2018
	Effective	Effective
Subsidiaries	ownership (%)	ownership (%)	Registered country	Nature of business

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

Pizza Restaurants LLC ("Domino's Russia") is established in the Russian Federation. Domino's Russia is operating a pizza delivery network of corporate and franchised 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.

Pizza Restaurantları A.Ş. ("Domino's Turkey") is established in Turkey. Domino's Turkey is operating a pizza delivery network of corporate and franchised stores in Turkey. Domino's Turkey is a food delivery company, which has a Master Franchise Agreement (the "MFA Turkey") with Domino's Pizza International pizza delivery network in Turkey until 2032. The Group expects the terms of the MFAs to be extended.

Fides Food and Fidesrus 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 2019. 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 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.

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 2019 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 acquisition date or until the date of sale.

The statements of financial position and statements of comprehensive income of the subsidiaries are consolidated on a line-by-line basis and the carrying value 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 Liras, 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 2019 31 December 2018

Period Period Period Period

Currency End Average End Average

Euros 6.6506 6.3484 6.0280 5.6751

Russian Roubles 0.0955 0.0872 0.0753 0.0760

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 organised and managed with respect to geographical positions of its operations. The information regarding the business activities of the Group as of 31 December 2019 and 2018 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 2019 and 2018 are as follows:

1 January-31 December 2019	Turkey	Russia	Other	Total

Corporate revenue	210,833	283,567	-	494,400
Franchise revenue and royalty
revenue obtained from franchisees	314,772	91,440	-	406,212
Other revenue	33,729	45,867	-	79,596
Total revenue	559,334	420,874	-	980,208
- At a point in time	553,396	417,732	-	971,128
- Over time	5,938	3,142	-	9,080
Operating profit	82,664	175	(11,773)	71,066
Capital expenditures	37,171	69,597	-	106,768
Tangible and intangible disposals	(4,442)	(10,608)	-	(15,050)
Depreciation and amortization expenses	(50,468)	(66,238)	-	(116,706)
Adjusted EBITDA (*)	134,599	63,889	(8,691)	189,797

(*) Adjusted EBITDA figures for 2019 include impact of the adoption of IFRS 16, and are therefore not on a like-for-like basis with the 2018 figures.

31 December 2019	Turkey	Russia	Other	Total

Borrowings
TRY	164,800	-	-	164,800
RUB	-	153,213	-	153,213
	164,800	153,213	-	318,013
Lease liabilities
TRY	93,054	-	-	93,054
RUB	-	163,081	-	163,081
	93,054	163,081	-	256,135
Total	257,854	316,294	-	574,148

1 January-31 December 2018	Turkey	Russia	Other	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	(7,318)	(14,615)	-	(21,933)
Depreciation and amortization expenses	(28,910)	(24,358)		(53,268)
Adjusted EBITDA	96,537	23,853	(9,810)	110,580

31 December 2018	Turkey	Russia	Other	Total

Borrowings
TRY	24,820	-	-	24,820
RUB	-	173,321	-	173,321
	24,820	173,321	-	198,141
Lease liabilities
TRY	2,610	-	-	2,610
RUB	-	14,855	-	14,855
	2,610	14,855	-	17,465
Total	27,430	188,176	-	215,606

EBITDA, adjusted EBITDA, net debt, adjusted net debt, adjusted net income and non-recurring and non-trade income/expenses are not defined by IFRS. The amounts provided with respect to operating segments are measured in a manner consistent with that of the financial statements. These items determined by the principles defined by Group management comprise income/expenses which are assumed by the Group management to not be part of the normal course of business and are non-recurring items. These items which are not defined by IFRS are disclosed by Group management separately for a better understanding and measurement of the sustainable performance of the Group.

The reconciliation of adjusted EBITDAs for 2019 and 2018 is as follows:

		Excluding IFRS 16 impact
TURKEY	2019	2019	2018

Adjusted EBITDA (*)	134,599	108,701	96,537

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

One off non-trading costs	131	131	191
Share-based incentives	1,336	1,336	896

EBITDA	133,132	107,234	95,450

Depreciation and amortization	(50,468)	(31,160)	(28,910)

Operating profit	82,664	76,074	66,540

		Excluding IFRS 16 impact
RUSSIA	2019	2019	2018

Adjusted EBITDA (*)	63,889	24,495	23,853

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

One off non-trading costs	(461)	(461)	1,051
Share-based incentives	(2,063)	(2,063)	1,618

EBITDA	66,413	27,019	21,184

Depreciation and amortization	(66,238)	(32,800)	(24,358)

Operating loss	175	(5,781)	(3,174)

		Excluding IFRS 16 impact
OTHER	2019	2019	2018

Adjusted EBITDA (*)	(8,691)	(8,691)	(9,810)

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

One off non-trading costs (**)	3,082	3,082	267

EBITDA	(11,773)	(11,773)	(10,077)

Depreciation and amortization	-	-	-

Operating loss	(11,773)	(11,773)	(10,077)

(*) 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 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 Group management separately for a better understanding and measurement of the sustainable performance of the Group. In addition, adjusted EBITDA figures for 2019 includes impact of adoption of IFRS 16 and not like for like basis with 2018 figures.

(**) The reason for the significant increase in one-off non-trading costs is related to a 2017 expense from the IPO that was invoiced in 2019.

The reconciliation of adjusted net income as of 31 December 2019 and 2018 is as follows:

		Excluding IFRS 16 impact
	2019	2019	2018

(Loss)/Profit for the period as reported	(5,616)	3,619	(11,093)

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

Share-based incentives	(727)	(727)	2,514
One-off expenses	18	18	1,507

Adjusted net (loss)/Profit for the period	(6,325)	2,910	(7,072)

(*) 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 headcount for the Group is as follows:

31 December 2019	Netherlands	Turkey	Russia
Number of employees	3	1,651	1,922

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

NOTE 4 - REVENUE AND COST OF SALES

	2019	2018

Corporate revenue	494,400	481,903
Franchise revenue and royalty
revenue obtained from franchisees	406,212	301,259
Other revenue	79,596	73,712

Revenue	980,208	856,874

Cost of sales	(636,466)	(566,250)

Gross profit	343,742	290,624

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 2019 and 2018 are as follows:

	2019	2018

As of January 1,	28,943	21,983
Recognized as revenue	(9,080)	(2,841)
Increases due to new franchise agreements entered	13,042	9,801
As of December, 31	32,905	28,943

Unsatisfied long-term franchisee contracts

The Group recognised net sales amounting to TRY 4,668 with respect to the performance obligations satisfied at a point in time for the year ended 31 December 2019 (31 December 2018: 4,374).

The amount of performance obligations relating to ongoing contracts of the Group that will be recognized in the future is TRY 37,572 (31 December 2018: TRY 33,326). The Group expects that this amount will be recorded as revenue within 15 years.

NOTE 5 - EXPENSES BY NATURE

	2019	2018

Employee benefit expenses	204,091	193,285
Depreciation and amortization expenses	116,706	53,268

	320,797	246,553

NOTE 6 - OTHER OPERATING INCOME AND EXPENSES

Other income	2019	2018

Marketing service income (*)	9,152	-
Interest income arising from
sales with extended terms	4,841	1,748
Gain from sale of property and equipment	2,222	6,354
Foreign exchange gains	2,674	1,651
Other	3,522	713

	22,411	10,466

Other expense	2019	2018

Legal and other provision expenses	3,783	821
Losses from sale of property and equipment	1,666	2,300
Foreign exchange losses	1,348	3,295
Other	1,072	945

	7,869	7,361

Other operating income, net	14,542	3,105

(*) For 2019, the marketing income mainly includes cross-promotion income.

NOTE 7 - FINANCIAL INCOME AND EXPENSES

Foreign exchange gains / (losses)	2019	2018

Foreign exchange gains / (losses), net	6,840	(18,770)
Foreign exchange losses on lease liabilities	(2,175)	-

	4,665	(18,770)

Financial income	2019	2018

Interest income on lease liabilities	13,736	-
Interest income	2,364	5,508

	16,100	5,508

Financial expense	2019	2018

Interest expense	42,739	41,118
Interest expense on lease liabilities	35,767	-
Other	6,597	2,809

	85,103	43,927

NOTE 8 - EARNINGS/(LOSS) PER SHARE

	2019	2018

Average number of shares existing during the period	145,372,414	145,372,414
Net loss for the period attributable to
equity holders of the parent	(5,616)	(11,093)

Loss per share	(0.0386)	(0.0763)

The reconciliation of adjusted earnings per share as of 31 December 2019 and 2018 is as follows:

	2019	2018

Average number of shares existing during the period	145,372,414	145,372,414
Net loss for the period attributable to equity
holders of the parent	(5,616)	(11,093)

Non-recurring and non-trade expenses
per Group management (*)
Share-based incentives	(727)	2,514
One-off expenses	18	1,507

Adjusted net loss for the period
attributable to equity holders of the parent	(6,325)	(7,072)

Adjusted Earnings per share (*)	(0.04)	(0.05)

(*) Adjusted earnings per share and non-recurring and non-trade income/expenses are not defined by IFRS. The amounts provided with respect to operating segments are measured in a manner consistent with that of the financial statements. These items determined by the principles defined by the Group management comprises income/expenses which are assumed by Group management to not be part of the normal course of business and are non-recurring items. These items which are not defined by IFRS are disclosed by Group management separately for a better understanding and measurement of the sustainable performance of the Group.

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 2019	Additions	Disposals	Transfers	Currency translation adjustments	31 December 2019

Cost
Machinery and equipment	55,668	20,911	(11,553)	-	11,799	76,825
Motor vehicles	32,963	3,825	(13,082)	-	6,269	29,975
Furniture and fixtures	62,109	9,211	(9,544)	-	776	62,552
Leasehold improvements	91,207	22,798	(13,987)	-	13,100	113,118
Construction in progress	3,024	1,795	-	-	2,606	7,425

	244,971	58,540	(48,166)	-	34,550	289,895

Accumulated depreciation
Machinery and equipment	(17,975)	(11,120)	6,868	-	(4,153)	(26,380)
Motor vehicles	(18,218)	(8,290)	10,168	-	(3,261)	(19,601)
Furniture and fixtures	(27,848)	(7,271)	6,600	-	(259)	(28,778)
Leasehold improvements	(44,889)	(15,319)	9,242	-	(4,127)	(55,093)

	(108,930)	(42,000)	32,878	-	(11,800)	(129,852)

Net book value	136,041					160,043

Depreciation expense of TRY 33,705 has been charged in cost of sales and TRY 8,295 has been charged in general administrative expenses.

	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.

NOTE 10 - INTANGIBLE ASSETS

	1 January 2019	Additions	Disposals	Transfers	Currency translation adjustments	31 December 2019

Cost
Key money	17,456	29,725	(1,192)	-	4,633	50,622
Computer software	45,573	18,503	(1,349)	-	5,945	68,672
Franchise contracts	48,485	-	-	-		48,485
	111,514	48,228	(2,541)	-	10,578	167,779

Accumulated amortization
Key money	(5,342)	(6,967)	1,193	-	(922)	(12,038)
Computer software	(17,178)	(10,145)	1,220	-	(2,886)	(28,989)
Franchise contracts	(40,480)	(4,848)	-	-	-	(45,328)
	(63,000)	(21,960)	2,413	-	(3,808)	(86,355)

Net book value	48,514					81,424

Amortisation expense of TRY 12,994 has been charged in cost of sales and TRY 8,966 has been charged in general administrative expenses.

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

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

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

Accumulated amortization
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.

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 - RIGHT OF USE ASSETS

Details of right-of-use assets as of 31 December 2019 and 1 January 2019 are as follows:

	31 December 2019	1 January 2019(*)
Right-of-use assets
Properties	166,147	145,624
Vehicles	14,089	16,822
	180,236	162,446

Details of lease receivable as of 31 December 2019 and 1 January 2019 are as follows:

	31 December 2019	1 January 2019(*)
Lease receivables
Current	16,618	13,857
Non-current	39,568	44,569
	56,186	58,426

Details of lease liabilities as of 31 December 2019 and 1 January 2019 are as follows:

	31 December 2019	1 January 2019(*)
Lease liabilities
Current	71,427	65,782
Non-current	184,708	172,555
	256,135	238,337

(*) In the previous year, the Group only recognised lease assets and lease liabilities (TRY17,465) in relation to leases that were classified as finance leases under IAS 17, "Leases". The assets were presented in property, plant and equipment and the liabilities as part of the Group's borrowings. For adjustments recognised on adoption of IFRS 16 on 1 January 2019, please refer to Note 2.4.

Movement of Right of use assets
				Currency
	1 January			translation	31 December
	2019	Additions	Disposals	adjustments	2019

Right-of-use assets
Properties	145,624	62,333	(28,334)	26,034	205,657
Vehicles	16,822	2,522	(1,672)	6,103	23,775
	162,446	64,855	(30,006)	32,137	229,432


Depreciation charge of right-of-use assets
Properties	-	(44,549)	4,653	386	(39,510)
Vehicles	-	(8,197)	1,672	(3,161)	(9,686)
	-	(52,746)	6,325	(2,775)	(49,196)

	162,446				180,236

For the year ended 31 December 2019, depreciation expense of TRY 44,859 has been charged to the cost of sales and TRY 7,887 has been charged to general administrative expenses.

	2019	2018
Interest expense on lease liabilities
Properties	(18,932)	-
Vehicles	(4,035)	-
	(22,967)	-

The total amount of interest of sub-lease income is TRY 13,736.

In 2019, the total cash outflow for principle of leases and interest of leases is TRY 60,875 and TRY 13,736, respectively. In 2019, the total cash inflow for interest of leases is TRY 12,800, respectively.

Expenses of low-value assets are TRY 60.

NOTE 12 - CASH AND CASH EQUIVALENTS

The details of cash and cash equivalents as of 31 December 2019 and 2018 are as follows:

	31 December 2019	31 December 2018

Cash	897	818
Banks	16,744	16,367
Term bank deposits (less than three months)	42,745	-
Credit card receivables	10,542	11,259
	70,928	28,444

(*) Maturity term of credit card receivables are 30 days on average (31 December 2018: 30 days).

The details of functional currency of the banks is as follows:

	31 December 2019	31 December 2018

TRY	12,228	8,914
RUB	45,451	5,425
EUR	1,276	1,638
OTHER	534	390
	59,489	16,367

NOTE 13 - TRADE RECEIVABLES AND PAYABLES

a) Short-term trade receivables

	31 December 2019	31 December 2018

Trade receivables	89,419	50,903
Post-dated cheques	27,154	19,148
Receivables from related parties (Note 14)	-	20

	116,573	70,071

Less: Doubtful trade receivable	(2,080)	(92)

Short-term trade receivables, net	114,493	69,979

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

Movement of provision for doubtful receivables is as follows:

	2019	2018

1 January	92	92
Current year charges	1,988	-

31 December	2,080	92

The group applied IFRS 9 simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance for all trade, lease and other receivables based on historical losses. The Group analysed the impact of IFRS 9 and the historical losses that were incurred in 2019 also impacted the expected credit losses going forward, resulting in an additional TRY 606 recorded as provision for doubtful receivables. The Group also assessed whether the historic pattern would change materially in the future. 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
0.02%	0.15%	0.32%	0.59%	11.3%	26.4%
129,995	971	3,726	1,236	1,788	199

Lease receivables has no history if default and expected credit loss percentages are close to zero and its effect is immaterial, so the table below consists of only trade and other receivables

b) Long-term trade receivables

	31 December 2019	31 December 2018

Trade receivables	7,467	10,729
Post-dated cheques	15,955	10,032

	23,422	20,761

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

c) Short-term trade and other payables

	31 December 2019	31 December 2018

Trade payables	108,995	70,635
Other payables	12,183	3,513

	121,178	74,148

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 2019 and 2018: less than three months).

NOTE 14 - TRANSACTIONS AND BALANCES WITH RELATED PARTIES

The details of receivables and payables from related parties as of 31 December 2019 and 2018 and transactions is as follows:

a) Key management compensation

	31 December 2019	31 December 2018

Short-term employee benefits	18,212	16,243
Share-based incentives	2,002	2,514

	20,214	18,757

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

b) Board compensation


	31 December 2019
	Base			Annual	Long-term		Total
	salary	Benefits	Pension	bonus	incentives	Total	(local
	(TRY)	(TRY)	(TRY)	(TRY)	(TRY)	(TRY)	currency)
Executive Directors
Aslan Saranga	2,295,945	171,479	-	748,086	614,971	3,830,481	₺ 3,830,481
Frederieke Slot	634,840	146,013	224,733	-	-	1,005,586	€ 158,400
Non-Executive Directors
Peter Williams	1,083,930	-	-	-	-	1,083,930	£ 150,000
Tom Singer	502,221	-	-	-	-	502,221	£ 69,500
Seymur Tarı	-	-	-	-	-	-	-
İzzet Talu	-	-	-	-	-	-	-
Aksel Şahin	-	-	-	-	-	-	-


	31 December 2018
	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	0	778,667	409,981	3,339,247	₺ 3,339,247
Frederieke Slot	566,140	130,212	200,414	-	-	896,766	€ 158,400
Non-Executive Directors
Peter Williams	957,765	-	-	-	-	957,765	£ 150,000
Tom Singer	443,764	-	-	-	-	443,764	£ 69,500
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 incentives

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 48, 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.

On 8 May 2018, Aslan Saranga was granted an LTIP award amounting to 279,322 shares (share price GBP 1.878), which will vest in May 2021 subject to achievement of an EBITDA growth target. On 3 May 2019, Aslan Saranga was granted an LTIP award amounting to 332,706 shares (share price GBP 0.88) which will vest in May 2022 subject to achievement of an EBITDA growth target.

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 15 - OTHER RECEIVABLES, ASSETS AND LIABILITIES

Other current assets
	31 December 2019	31 December 2018

Advance payments	36,217	9,687
Deposits for loan guarantees (1)	18,683	24,195
Lease receivables	16,618	-
Prepaid taxes and VAT receivable	2,740	3,177
Prepaid marketing expenses	1,486	2,018
Prepaid insurance expenses	1,029	4,857
Contract assets related to
franchising contracts (2)	482	438
Other	4,610	1,212

Total	81,865	45,584

(1) In December 2019, the Group repaid a portion of its loans to Sberbank Moscow and the TRY31,643 (RUB 420 million) cash deposit condition that was made as collateral by the Fidesrus.

(2) The Group incurs certain costs with Domino's Pizza 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 2019	31 December 2018

Lease receivables	39,568	-
Long-term deposits for	21,624	8,342
loan guarantees (1)	21,624	8,342
Prepaid marketing expenses	8,232	7,173
Contract assets related to
franchising contracts (2)	4,186	3,936
Deposits given	1,861	5,909
Other	-	29

Total	75,471	25,389

(1) In December 2019, the Group repaid its 9.7% loan in the amount of RUB 690 million. The loan carries a TRY 31,643 (RUB 420 million) cash deposit condition that was made as collateral by the Russian operating company. The principal amount is payable monthly from August 2019.

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

Other current liabilities
	31 December 2019	31 December 2018

Taxes and funds payable	13,351	6,047
Payable to personnel	8,044	6,970
Volume rebate advances	7,805	942
Unused vacation liabilities	7,523	6,404
Performance bonuses	4,961	7,408
Social security premiums payable	4,109	3,588
Advances received from franchisees	4,057	2,243
Contract liabilities from franchising contracts (1)	2,908	5,727
Other expense accruals	11,254	2,791

Total	64,012	42,120

(1) The Group incurs certain revenue with the set up of each franchise contract and these franchise fee revenues are deferred over the period of the franchise agreement.

Other non-current liabilities
	31 December 2019	31 December 2018

Contract liabilities from franchising contracts (1)	34,664	27,599
Long term provisions for
employee benefits	2,051	1,665
Other	2,377	774

Total	39,092	30,038

(1) The Group incurs certain revenue with the set up of each franchise contract and these franchise fee revenues are deferred over the period of the franchise agreement.

NOTE 16 - FINANCIAL LIABILITIES

	31 December 2019	31 December 2018

Short term bank borrowings	164,800	24,820

Short-term financial liabilities	164,800	24,820

Short-term portions of long-term borrowings	54	11,721
Short-term portions of long-term leases	71,427	7,789

Current portion of long-term financial liabilities	71,481	19,510

Total short-term financial liabilities	236,281	44,330

Long-term bank borrowings	153,159	161,600
Long-term leases	184,708	9,676

Long-term financial liabilities	337,867	171,276

Total financial liabilities	574,148	215,606

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

31 December 2019

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

TRY borrowings	Revolving	10.88	164,800	-
RUB borrowings	2024	9.70	54	153,159


			164,854	153,159

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

The loan agreement between Sberbank Moscow and Domino's Russia is subject to covenant clauses whereby the Group, Domino's Turkey and Domino's Russia are required to meet certain ratios. The financial indicator of:

- the Domino's Russia; which requires the ratio of financial debt to adjusted EBITDA for the relevant period, should not be more than 11;

- the Domino's Turkey; 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 Domino's Turkey 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 the covenant clauses of Sberbank Moscow.

The redemption schedule of the borrowings as of 31 December 2019 and 2018 is as follows:

	31 December 2019	31 December 2018

To be paid in one year	164,854	36,541
To be paid between one to two years	4,627	19,044
To be paid between two to three years	44,522	25,404
To be paid between three years and more	104,010	117,152

	318,013	198,141

The redemption schedule of the leases as of 31 December 2019 and 2018 is as follows:

	31 December 2019	31 December 2018

Leases to be paid in one year	71,427	7,789
Leases to be paid between one to two years	77,979	6,128
Leases to be paid between two to three years	86,849	3,548
Leases to be paid between three years and more	19,880	-

	256,135	17,465

The details of the finance lease liabilities as of 31 December 2019 and 2018 are as follows:

	31 December 2019	31 December 2018

Total financial lease payments	-	25,209
Interest to be paid in upcoming years	-	(7,744)

	-	17,465

As of 31 December 2019 and 2018, net financial liabilities reconciliation is below:

	31 December 2019	31 December 2018

Cash and cash equivalents	70,928	28,444
Financial liabilities and leases to be paid in one year	(236,281)	(44,330)
Financial liabilities and leases to be paid in one to five years	(337,867)	(171,276)

	(503,220)	(187,162)

	31 December 2019	31 December 2018

Cash and cash equivalents	70,928	28,444
Financial liabilities and lease - fixed rate	(316,294)	(188,176)
Financial liabilities - floating rate	(257,854)	(27,430)

	(503,220)	(187,162)

31 December 2019	Short term financial liabilities and leases			Long term financial liabilities and leases		Total

1 January
financial liabilities	(44,330)			(171,276)		(215,606)

Net cash flow effect, loans received	(147,443)			(17,790)		(165,233)
Net cash flow effect, loans paid	5,668			79,785		85,453
Net cash flow effect, leasing payments	60,875			-		60,875
Interest of leases paid	22,031			-		22,031
Lease liability (IFRS 16)	(88,045)			(211,662)		(299,707)
Interest on financial liabilities	(17,311)			-		(17,311)
Currency translation adjustments	(27,726)			(16,924)		(44,650)

31 December financial liabilities	(236,281)			(337,867)		(574,148)

31 December 2018		Short term financial liabilities and leases	Long term financial liabilities and leases		Total

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

Net cash flow effect, loans received		(48,345)	(11,503)		(59,848)
Net cash flow effect, loans paid		91,887	13,070		104,957
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		(123,549)	(92,057)		(215,606)

The reconciliation of adjusted net debt as of 31 December 2019 and 2018 is as follows:


	2019	2018

Short term bank borrowings	164,854	36,541
Short-term portions of
long-term lease borrowings	71,427	7,789
Long-term bank borrowings	153,159	161,600
Long-term lease and borrowings	184,708	9,676

Total borrowings	574,148	215,606

Cash and cash equivalents (-)	(70,928)	(28,444)

Net debt	503,220	187,162

Non-recurring items
per Group management
Long-term deposit for loan guarantee	(34,253)	(32,537)

Adjusted net debt (*)	468,967	154,625

(*) 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 17 - 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.

Services incurred by Dutch parent companies may generally be divided into two kinds of services being group services for which costs are incurred for the economic and commercial benefit of subsidiaries and shareholder services for which costs are incurred for activities provided in the capacity of the shareholder. All costs incurred by the Company are shareholder services (costs incurred for activities provided in the capacity of shareholder) and not group services (costs incurred for the economic or commercial benefit of subsidiaries).

Since shareholder services are not for the benefit of any one specific subsidiary, it is not required to re-charge these fees or costs to a subsidiary or to subsidiaries.

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 2018: 22%) 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 22% 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 as established in Chapter 25 of the Tax Code of the Russian Federation. Corporate tax is payable at a rate of 20% (31 December 2018: 20%) as identified in Article 247 of the Tax Code of the Russian Federation Special rules may apply in cases where a different from 20% tax rate is used.

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 consists of the following:

	2019	2018

Corporate tax calculated	15,318	11,579
Prepaid taxes (-)	(8,947)	(4,608)

Tax liability	6,371	6,971

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

	2019	2018

Current period corporate tax expense	(15,318)	(11,579)
Deferred tax income / (expense)	2,974	4,385

Tax expense	(12,344)	(7,194)

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

	2019	2018

Profit before tax	6,728	(3,899)

Corporate tax at statutory rates (25%)	(1,682)	975
Disallowable expenses	(7,423)	(5,834)
Unrecognised tax losses	(5,287)	(2,714)
Differences in tax rates	1,646	(323)
Other, net	402	702

Total tax expense	(12,344)	(7,194)

The breakdown of cumulative temporary differences and the resulting deferred income tax assets/liabilities at 31 December 2019 and 2018 using statutory tax rates are as follows:

	31 December 2019		31 December 2018
		Deferred tax		Deferred tax
	Temporary	assets/	Temporary	assets/
	differences	(liabilities)	differences	(liabilities)

Carry forward tax losses (*)	44,926	8,985	38,001	7,600
Contract liabilities from franchising contracts	34,826	7,486	28,943	6,367
Expense accruals	18,529	3,708	9,515	2,093
Bonus accruals	4,695	1,011	7,168	1,517
Unused vacation liabilities	3,368	741	2,663	586
Legal provisions	3,606	793	1,816	399
Provision for employee termination benefit	2,051	451	1,665	366
Right of use assets and lease liability	13,625	2,845	-	-
Other	1,173	211	3,220	554
	126,799	26,231	92,991	19,482

Property, equipment and intangible assets	(36,642)	(8,171)	(39,727)	(7,861)
	(36,642)	(8,171)	(39,727)	(7,861)

Deferred income tax assets, net		18,060		11,621

(*) 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 income statement.

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 realisation of the related tax benefit through the future taxable profits is probable. Domino's Russia recognise deferred income tax assets arising from tax losses, tax discounts and other temporary differences with the estimates and assumptions relying on Domino's Russia management's five-years business plan and potential growth opportunities in Russia.

Movement of the deferred tax for the year ended 31 December 2019 and 2018 are as follows:

	2019	2018

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

Charged to the statement of income	2,974	4,746
Currency translation difference	3,434	866
Charged to other comprehensive income	30	81

Balance at the end of the year	18,060	11,622

NOTE 18 - SUBSEQUENT EVENTS

According to an amendment to the Sberbank Loan Agreement signed by the Group's Russian subsidiary and Sberbank, the Company and its Turkish subsidiary were required to sign the amendment as guarantors by 27 February 2020. At 20 March 2020, the deadline to meet this requirement has been extended by Sberbank to 30 April 2020. The Group expects no difficulty in meeting this requirement.

We see the potential for a prolonged period of uncertainty following the COVID-19 worldwide outbreak and related market volatility, which have had relatively little impact on our business operations year to date. Currently, our stores are open and operating as normal with the exception that customers are not able to eat-in in our Turkish stores (although our delivery and take-away businesses continue as normal). Future adverse impacts from the COVID-19 outbreak may include, but are not limited to, employees contracting the disease, difficulty in recruiting new employees, decrease in demand for our products, reduced store operating hours, temporary bans imposed by government on eat-in and/or take-away services, store closures for an unspecified period of time and the Group not being able to perform its obligations under the Master Franchise Agreements. These conditions indicate the existence of a material uncertainty which may cast significant doubt about the Company's ability to continue as a going concern and, therefore, its ability to realise its assets and discharge its liabilities in the normal course of business.

We have no indication whether governmental measures will have an effect in preventing a further spread of the disease around the world and therefore the duration of the pandemic. If the pandemic and its impact on the business last for a protracted period it is likely to have a more detrimental effect on the financial performance of the Group. The Group has taken proactive measures to ensure that our customers and employees continue to be safe. The Group has already established an internal task force to ensure that the supply chain is managed, critical inventory is available, and restaurants remain adequately staffed. We appreciate that the Turkish government has indicated its preparedness to support companies and encourage banks to maintain access to credit facilities so as to assist the corporate sector manage through the crisis and maintain employment.

………………………

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END

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