DP Eurasia NV's (LON:DPEU) H118 trading statement highlighted the company’s progress in tapping the under-penetrated Russian and Turkish pizza markets. Online sales continue to grow as a proportion of system sales following app upgrades in 2017. High barriers to entry in the Russian market, coupled with challenging weather and traffic, have restricted geographic diversity. However, with 4.3x more stores in Turkey than the number two competitor, we believe the maturing base and the company’s expansion plans support market forecasts for strong annual EBITDA growth of 24% over the next three years.
H118 trading statement
Total system sales growth was strong at 28.1% and Russian like-for-like sales growth normalized at 18.0% (H117’s 31% resulted from early stage development), while Turkey also grew robustly at +10.9%. Online system sales growth of 64.5% was driven by app uptake in both markets, particularly Russia which displayed local currency growth of 88.6%. Leveraging the platform, online grew from c 50% to c 59% of delivery system sales but the Domino's UK figure of c 80% of total system sales indicates there is still upside potential. The current store mix is 37% corporate vs 63% franchised, with a medium-term equilibrium expectation of c 30:70.
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