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DP Eurasia N.V.
Annual Report and Accounts 2019
Proof 06 19/03/20 EM06
About us
DP Eurasia N.V.
(“DP Eurasia” or the
“Company”) is the
exclusive master
franchisee of the
Domino’s Pizza brand
in Turkey, Russia,
Azerbaijan and Georgia.
Domino’s Pizza is one of the most
successful fast‑food brands worldwide
and a global leader in home delivery.
Visit us online at
www.dpeurasia.com
DP Eurasia N.V. Annual Report and Accounts 2019 | 1
What’s inside
Overview
Group financial statements
2 At a glance
4 Highlights
5 Key financial figures
Management report
6 Chairman’s statement
7 Competitive advantages
8 Vision and strategy
10 Message from the CEO
11 Key events
12 Business model
14 People
18 Product
20 Digital
22 Strategic review
28 Management report
32 Remuneration report
80 Consolidated statement of
comprehensive income
81 Consolidated statement of financial position
82 Consolidated statement of changes in equity
83 Consolidated statement of cash flows
84 Notes to the consolidated financial statements
Company financial statements
128 Company income statement
129 Company balance sheet
130 Notes to the Company financial statements
Other information
134 Independent auditor’s report
35 Directors’ remuneration policy
Additional information
44 Annual remuneration report
50 Board
52 Leadership team
53 Board attendance and composition
54 Corporate governance report
64 How we manage risk
75 Board declaration
76 Shares and shareholders
144 Contacts
144 Glossary
People
Product
Digital
Find out more on page 14
Find out more on page 18
Find out more on page 20
Overview 2 | DP Eurasia N.V. Annual Report and Accounts 2019
At a glance
Domino’s Pizza is one of the most successful fast-food
brands and an international leader in home delivery
with global retail sales of over USD 14.3 billion in 2019.
DP Eurasia is the fifth-largest master franchisee of the
Domino’s Pizza brand owned by Domino’s Pizza Inc.
TRY 1.4
billion
system sales
765
stores across
4 countries
68%
franchised
store mix
70%
of delivery
online
DP Eurasia together with its subsidiaries (the “Group”)
offers pizza delivery and takeaway/eat‑in facilities at its
765 stores (as at 31 December 2019) across four countries
(550 in Turkey, 203 in Russia, eight in Azerbaijan and four
in Georgia).
The Group operates through its corporate stores and
franchised stores (together, its “system stores”). As of
31 December 2019, 32% of the Group’s system stores were
corporate stores, principally located in densely populated
cities, and 68% were franchised stores. The corporate
stores serve as a platform to develop best practices that
the Group subsequently deploys in its franchised stores.
Since 2010, the Group has rapidly expanded,
opening (on a net basis) an average of approximately
70 system stores per year (from 2011 to 2019). As at
31 December 2019, the Group operated 765 system
stores, of which 521 were franchised. The Group intends to
continue to rapidly expand its store network in the future.
The Group has adapted the Domino’s Pizza globally
proven business model to its local markets. The Group has
a centralised supply and procurement function, owning
and operating seven commissaries which manufacture
pizza dough and supply its system stores.
The Group offers consumers high quality, freshly made
pizzas, which it tailors to local tastes, at attractive prices,
delivered within 30 minutes of ordering. It also offers
complementary products, side dishes such as chicken,
and desserts, some of which have been developed by the
Group’s innovation centre in Istanbul and subsequently
adopted by other master franchisees of Domino’s Pizza
around the world.
Our history
Founded in 1996 by our Chief Executive Officer,
Aslan Saranga, the Group became the master
franchisee of Domino’s Pizza in Turkey, expanding
rapidly, with its 100th store opening in Istanbul
in 2008.
In 2012, the Group was awarded the exclusive
master franchise of the Domino’s System for Russia,
and in 2015, the Group opened its first franchised
stores in Azerbaijan and Georgia. In 2017, the
Group listed on the premium segment of the
London Stock Exchange. The Group today is the
largest pizza delivery company in Turkey and the
third‑largest in Russia, in terms of number of stores.
DP Eurasia N.V. Annual Report and Accounts 2019 | 3
Where we operate
Growing regional expansion
from an established strong
base in Turkey
DP Eurasia offers pizza
delivery and takeaway/eat‑in
facilities at its 765 stores (as at
31 December 2019) across
four countries (Turkey, Russia,
Azerbaijan and Georgia).
Franchised stores
Corporate stores
Commissaries
Turkey
427
123
4
Russia
82
121
3
Georgia
4
8
Azerbaijan
Our vision
Vision
The Group’s vision is to
be an international leader
in the areas in which it
operates by utilising the
best market practices and
continually innovating to
provide excellent services
to both customers and the
community.
Mission
The Group’s mission is to
create value for shareholders
and respect the community in
a socially responsible way.
Values
Underpinning the Group’s
ethical principles and business
conduct are its core values of
ambition, integrity, cohesion
and team spirit.
Overview 4 | DP Eurasia N.V. Annual Report and Accounts 2019
Highlights
Financial highlights
• Group revenue up 14.4% and system
sales up 21.8%, driven by like‑for‑like
growth and store openings
• Adjusted EBITDA (excl. IFRS 16)
up 12.6% to TRY 124.5 million
(2018: TRY 110.6 million)
– Turkish systems sales growth of 14.9%
– Russian system sales growth of 34.8%
(17.5% based on RUB)
• 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
• Turkey and Russia continue to leverage
twelve months, bringing the total number
to 765
online ordering; share of delivery
system sales reached 70% for the year
(2018: 61%)
• Group online system sales(7)
growth of 39.8%
– Turkish online system sales(7)
growth of 33.5%
– 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
(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 18 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.
DP Eurasia N.V. Annual Report and Accounts 2019 | 5
Key financial figures
System sales in TRY million
Revenue in TRY million
Adjusted EBITDA in TRY million
1,370.3
1,125.3
980.2
856.9
859.8
626.5
124.5
110.6
90.8
17
18
19
17
18
19
17
18
19(1)
Online as a % of delivery
Like-for-like growth % – Turkey
Like-for-like growth % – Russia
70.0
60.8
51.8
10.0
9.3
13.1
28.9
16.0
17
18
19
17
18
19
17
18
0.7
19
(1) Excluding IFRS 16.
For the year ended 31 December
(in millions of TRY, unless otherwise indicated)
Number of stores
Group system sales(1)
Group
Turkey
Russia
Azerbaijan & Georgia
Group system sales like-for-like growth(2)
Group(8)
Turkey
Russia (based on RUB)
Group revenue
Group adjusted EBITDA(3) (excl. IFRS 16)
Group adjusted net income(4) (excl. IFRS 16)
Group adjusted net debt(5) (excl. IFRS 16)
Group adjusted EBITDA(3)
Group adjusted net loss(4)
Turkey adjusted EBITDA(3)
Turkey adjusted EBITDA(3) (excl. IFRS 16)
Russia adjusted EBITDA(3)
Russia adjusted EBITDA(3) (excl. IFRS 16)
2019
765
2018
Change
724
41
1,370.3
1,125.3
21.8%
845.7
503.3
21.2
736.1
14.9%
373.5
34.8%
15.7
34.8%
10.7%
10.3%
13.1%
0.7%
9.3%
16.0%
980.2
856.9
14.4%
124.5
110.6
12.6%
(7.1)
n.m.
2.9
226.5
189.8
154.6
110.6
(6.3)
(7.1)
134.6
108.7
63.9
24.5
96.5
96.5
23.9
23.9
n.m.
n.m.
n.m.
12.6%
n.m.
2.7%
Overview
6 | DP Eurasia N.V. Annual Report and Accounts 2019
Chairman’s statement
DP Eurasia continues to make
a difference through its mission
to become a tech company
selling pizza.
In 2019 the Group focused on
maintaining Domino’s unique local
cultural elements and integrating
them with new technology‑driven
business needs. DP Eurasia continues
to make a difference through its
mission to become a tech company
selling pizza.
Corporate governance
We continue to strive for
transparency for shareholders
and other stakeholders, with a view
to maintaining and enhancing our
corporate culture and governance
framework. The corporate
governance report set out on
pages 54 to 63 provides details
on how we are continuing to foster
an environment of entrepreneurial
leadership and innovation in a
framework of responsible governance
and risk management.
People
These results are a tribute to the
ongoing dedication and commitment
of Aslan and his teams during the past
year. I would like to thank Aslan and
all of our employees and franchisees
for their valuable contribution and
determination to succeed.
Outlook
The Board has been closely
monitoring the Group’s strategy as
well as the financial and operational
performance throughout the
year. Issues with Russian regional
franchisees have been successfully
resolved, with the Group negotiating
the acquisition of a majority of the
stores in the regions.
We believe that with a sound
management team and with
committed franchisees, the Group
is in a solid position to continue its
growth strategy. We thank you for
your trust and commitment in the
months and years ahead.
At the time of writing, events
continue to unfold in regards to
coronavirus (Covid‑19) and it is
currently unclear as to the impact on
the Group and its business. For the
time being, the Group has been
following the guidance issued by the
relevant local Governments and has
put appropriate protections in place.
Peter Williams
Chairman
26 March 2020
Peter Williams
Chairman
I am about to start my fourth year
as Chairman of DP Eurasia N.V and it
is my pleasure to present the results
for the year ended 31 December 2019.
In a period where the Group
faced some challenges in Russia,
the resilience of the Group was
demonstrated by another year of
solid growth. The Board is committed
to developing the business by
continuing to invest in people,
technology and products.
Financial results
The strength of our business model
and the Domino’s brand underpins
our robust financial results in 2019.
Adjusted EBITDA increased by
12.6% to TRY 124.5 million, driven
by revenue growth of 14.4% to
TRY 980.2 million. We opened
41 stores across the Group in 2019,
bringing the total store count by
the year end to 765.
Our focus
Innovation, in respect of both our
products and technology, continues
to be the main driver of our strong
performance with significant revenue
increases in both of our markets.
Online ordering as a percentage of
delivery has reached 70%, an increase
of more than nine percentage points
from 2018 with the Russian business
exceeding 80%.
DP Eurasia N.V. Annual Report and Accounts 2019 | 7
Competitive advantages
DP Eurasia is well positioned to continue delivering
against its strategy thanks to its unique competitive
advantages.
1
2
Leading market positions
Highly attractive, underpenetrated
markets with substantial growth
potential in the Group’s addressable
segments
3
4
Strong online capabilities underpin
DP Eurasia’s growth
Globally proven business model
successfully applied and adapted to
DP Eurasia’s local markets
5
6
Simple and scalable, asset-light
business model
Highly attractive customer proposition
and strong brand equity
7
8
Track record of resilient and profitable
growth as well as strong cash conversion
Founder-led, experienced
management team
Management report 8 | DP Eurasia N.V. Annual Report and Accounts 2019
Vision and strategy
DP Eurasia has a simple and scalable, asset-light business
model, offering globally recognised pizza products at a
range of price points, adapted to local tastes.
DP Eurasia’s strategy for growth is focused
around four main pillars:
As the online channel becomes more
prominent in the Group’s sales mix and
continues to drive like-for-like growth,
the Group’s ordering channel strategy is
focused on development of proprietary
online ordering platforms for delivery
and takeaway.
The Group’s online delivery system sales
as a percentage of delivery system sales
has reached 70%, with Russia exceeding
80% in 2019.
The Group plans to capitalise on its strong
market positions in its existing markets,
where it believes there is significant
capacity for further Domino’s Pizza store
locations. It intends to open new corporate
and franchised stores, including “splits”
of existing stores where demand supports
further profitable growth. The Group
evaluates its store locations from the
perspective of potential sales, level of
competition, number of households and GDP
per capita. By pursuing its “castle” strategy,
the Group is able to rapidly roll out clusters
of complementary corporate and franchised
stores, establishing greater area coverage,
fulfilling its 30-minute delivery guarantee
and building strong local brand awareness.
Like-for-like
growth
2019
Group
10.7%
13.1%
0.7%
New stores
2019
+41
Focus on
innovation and
online ordering to
drive like-for-like
growth
Store network
growth
DP Eurasia N.V. Annual Report and Accounts 2019 | 9
The Group believes that the operating
leverage in its business in Turkey can
create further value as the store and
online footprint continues to increase.
The nationwide scale of the Group’s
operations reinforces brand awareness,
making Domino’s Pizza a household name
in Turkish fast food, thereby further driving
sales and the system stores’ contribution to
the Group’s national advertising initiatives.
In Russia, the Group expects to extract
similar value from the operating leverage
as the Group plans to continue to grow the
franchise part of the business and increase
the overall scale of the system.
Adjusted
EBITDA
(excluding
IFRS 16)
as a % of
system sales
2019
0.3%
12.5%
1.5%
4.9%
While the Group’s current focus is on the development of
the business in its current markets, the Group may consider
acquiring other master franchise licences and expanding to
territories currently unpenetrated by the Domino’s System.
Such international expansion is a discretionary strategy that
the Group will consider and pursue on an opportunistic basis
should valuations prove attractive.
Leveraging scale
advantage to
further improve
profitability
Potential
for further
international
expansion
Management report 10 | DP Eurasia N.V. Annual Report and Accounts 2019
Message from the CEO
On behalf of the Board, I am pleased
to report another year of solid growth
in 2019.
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
achieved 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 two 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.
Aslan Saranga
Chief Executive Officer
26 March 2020
Aslan Saranga
Chief Executive Officer
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.
DP Eurasia N.V. Annual Report and Accounts 2019 | 11
Key events
Our achievements in 2019 included opening
41 new stores, reaching the 550th store milestone
in Turkey and the 200th store milestone in Russia.
January 2019
KitKat®
chocolate
pizza launch
GPS Tracker
launch
February 2019
Enhanced
website and
apps launch
April 2019
Pineapple pizza
launch
September 2019
Dürümos wrap
launch
December 2019
200th store
550th store
Management report 12 | DP Eurasia N.V. Annual Report and Accounts 2019
Business model
Our asset-light and scalable business model allows
for continuous investment in our people, our product
and our digital platforms, delivering value to all our
stakeholders.
Competitive strengths
Business model
Globally recognised
brand
Large-scale
network
Low-cost centralised
supply chain
Centralised
strategy,
marketing and IT
Disciplined
approach
Commissaries
Dough and
other ingredients
Logistics
Sales and delivery
Local marketing
Customer data
Franchised stores
Sales and delivery
Local marketing
Customer data
Corporate stores
DP Eurasia N.V. Annual Report and Accounts 2019 | 13
Strategic pillars
Stakeholders
People
See pages 14 to 17
Product
See pages 18 and 19
Digital
See pages 20 and 21
Customers
Employees
Shareholders
Community
Franchisees
Suppliers
Underpinned by our culture
Ambition
The Group is
committed to
improving and
demonstrating an
eagerness to develop
to overcome new
challenges in order
to contribute to
its growth.
Integrity
The Group is
dedicated to
choosing the path
which strengthens its
principles of honesty,
truth, loyalty,
rectitude and justice
in the daily conduct
of all workers.
Cohesion
The Group aims
to guarantee that
the ambitious
goals it sets are
achieved through
the contribution of all
business units.
Team spirit
The Group operates
globally in culturally
diverse contexts
and encourages,
amongst all workers,
a sense of belonging,
respect for
differences, loyalty
and reciprocity.
Management report 14 | DP Eurasia N.V. Annual Report and Accounts 2019
People
In 2019, whilst continuing to
grow, the Group focused on
keeping Domino’s unique
cultural elements alive.
DP Eurasia N.V. Annual Report and Accounts 2019 | 15
In 2019, whilst continuing to grow,
the Group focused on keeping
Domino’s unique cultural elements
alive and integrating them with its
new technology‑driven business
needs. DP Eurasia continues to
make a difference through its
objective to “become a tech
company selling pizza”.
Grow together
DP Eurasia is proud of the
opportunities available to its people,
employees can have flexible part‑time
jobs or full‑time careers and, thanks
to our internally developed training
programmes, the opportunity to
climb the career ladder is open to
all employees. The aspiration to
have one’s own store in the future
is present at every level of the
organisation, we are proud of the
fact that six homegrown franchisees
realised their dreams by taking
ownership of their stores in 2019.
The technology department was
restructured in 2019 to align
with the Group’s business needs.
This brought new people practices
for a young, tech‑savvy population,
recruitment methods, career steps
and compensation practices were
redesigned with respect to the needs
of technical professionals.
The Group has different development
programmes for different target
groups of employees, based on
technical necessities, personal
assessments and specific business
needs. Integrated programmes
covering a mix of disciplines
(e‑learning, webinars, classroom and
on‑the‑job training, exams, lectures,
etc.) are provided to ensure core
values and processes are effectively
communicated irrespective
of geography. All career and
project‑based training is delivered
in‑house using internal trainers.
In 2019, 788 managers were trained
via these programmes.
In 2019, the Group started a long‑term
Leadership Development Programme
named “Be the Best” in Turkey.
Leadership attributes were redefined
within this programme in accordance
with the Group’s future vision and
strategies. In order to equip managers
with leadership skills, middle and
senior management were selected to
undertake a range of activities (online
modules/discussions, in‑class training,
group coaching sessions, with regular
feedback including 360‑degree
assessment of defined skills).
The programme is continuing in 2020
and a similar version is being held
in Russia to transmit our leadership
culture throughout the Group.
Live together
The Domino’s experience is not
just about working at DP Eurasia.
Each employee experiences key
milestones of their lives whilst at the
Group. To create the feeling of being
a member of a big family, several
cultural activities are organised
during the year.
To ensure all employees are
informed of business performance
and objectives the Group uses a
variety of internal communication
methods including corporate
intranet, workshops, newsletters,
CEO announcements, videos and
e‑mail. A variety of corporate events
were held in 2019, such as monthly
restaurant managers’ meetings and
our annual Rally event.
At DP Eurasia, all new employees go
through an onboarding process called
Pizza Prep School to learn about the
Company and its culture. In 2019, the
Pizza Prep School was strengthened
with the participation of senior
management at each event.
DP Eurasia employees are passionate
about making pizza. The Fastest Pizza
Maker competition is an annual event
of great importance, where the top
performers are selected to represent
their local team in regional and global
Domino’s competitions. The motto
“Sell more pizza, have more fun”
is evident at all levels throughout
the organisation.
Management report 16 | DP Eurasia N.V. Annual Report and Accounts 2019
People continued
DP Eurasia continues to make a difference with its
leading industry standards and strong cultural values,
enhanced with a workforce engagement programme
in 2019.
Live together continued
Franchisees are integral to DP
Eurasia. Because of the important
role they play in the system, they
must complete an “Onboarding
for New Franchisees” programme.
The current training programme
was updated to ensure franchisees
get the necessary information to
become winning partners in the
Domino’s System. Whilst the number
of franchises continues to grow, the
Group simultaneously employs an
enriched communications system
including roadshows, newsletters,
videos and e‑mails, to keep channels
open between the headquarters and
the franchisees.
Celebrate together
The Domino’s Pizza Rally is one of
the largest and most important of
our corporate events. The Rally, held
across the network, is an opportunity
to inspire franchisees and colleagues
with spectacular opening shows,
surprise stage performances,
and guest speakers, and also to
communicate our annual strategy.
Recognition of significant individual
contributions to the Group’s
development forms the basis of
the rewards strategy. Extraordinary
accomplishments such as strong
sales performances, operational
excellence, high customer service
scores, and managers who support
and encourage others are recognised.
121 awards were given in 2019,
and four award winners from Russia
visited the Domino’s Rally in Turkey
for the first time.
Franchisee recognition is equally
important as employee recognition,
so Gold Franny awards are presented
at every local Rally. In 2019, twelve
franchisees won the award, having
been judged on criteria such as
sales growth, store openings and
operational performance.
The Group attaches importance to
employees’ loyalty and happiness,
organising various events to this
end. Feedback is collected and used
to generate deliverable actions,
improving the performance and
wellbeing of employees. As such,
in 2019, employee satisfaction
scores increased in Turkey and
were maintained in Russia.
Human rights
There is no discrimination on the
basis of gender, colour, ethnicity,
religion or disability and the Group
provides equal opportunities in all
areas of work including employment,
wage policy and career development.
These rights are recognised in our
Code of Conduct.
Labour safety and
working conditions
The Group aims to create a
comfortable working environment
for employees through an
integrated safety programme,
which continuously monitors and
improves labour conditions and
accelerates efforts to upgrade
work processes. Health and Safety
Committee meetings are held
regularly; all cases are reviewed and
precautions are suggested to further
reduce risk.
DP Eurasia N.V. Annual Report and Accounts 2019 | 17
Additionally, a formal suggestion
system will be developed in 2020.
This system will reward employees
when sharing suggestions in different
categories that actually prove to be
beneficial to business practices or
the organisation in general. A special
committee will judge all ideas and
the winners will be announced
periodically.
Board involvement
The input received is channelled
by the HR department and regular
employee engagement updates
are provided by the HR Director at
Remuneration Committee meetings.
The Remuneration Committee
considers it an ongoing process
to build on activities already in
place, and to decide whether to
introduce further methods to improve
workforce engagement. Current
practices show that there is ongoing
communication with employees
throughout the year. Every year,
an annual communication calendar
is released to foster both vertical
and horizontal communication. It is
important to have continuity in the
engagement with the workforce
because of the fact that the Group
continuously welcomes new
employees. By showing that the
Group values the input and feedback
of the employees and by creating and
sustaining a strong link between the
Board, management and individual
expectations, the employees feel
valued, which in itself increases
engagement.
• quarterly top ten restaurant
employee meetings: lunches with
high‑performing restaurants
together with management to
celebrate success and to receive
suggestions on marketing, people
practices and operational plans;
• regular employee meetings:
breakfast meetings with each
HQ department. Although
these breakfasts were initially
instigated to improve the bonds
of trust between HR and the other
departments, it is also another
informal way to hear the voices of
individual employees or the input or
concerns of a certain department;
• Job Security and Safety Committee
meetings: bi‑monthly meetings in
which representatives from certain
store are invited to understand
and receive their opinion about the
current safety practices in place;
• HR business partner observations:
regular activity in which dedicated
partners spend time with
employees in one to one interviews.
Their observations are shared
with the senior management;
• feedback surveys: sent after every
activity to understand satisfaction
and get ideas for the next event;
• focus groups: organised for specific
subjects when needed and regularly
necessary, to analyse before
developing training content;
• franchisee roadshows: carried
out four times in 2019 in Turkey
with the participation of different
departments to visit franchisees
in their own stores; and
• new franchisee onboarding:
annual activity where new
franchisees are made familiar
to the Domino’s culture.
Workforce engagement
The Group has incorporated different
ways to engage with its workforce.
Some ways are country specific
and a certain approach may not
be appropriate for all locations.
It is intended to engage with all
employees but for certain activities,
different people are invited every
year to learn different perspectives,
or only a certain target group will be
invited. The feedback received helps
the Group to better understand the
visions, standpoints and comments
on the Group’s human resource policy
and the general business operations
to take this into account when
developing or amending policies and
future decision‑making.
Below is an overview of the different
activities enrolled to engage with the
Group’s employees and franchisees:
• ‘Employee Engagement Surveys’:
these surveys are carried out by a
third party company to understand
employees’ thoughts on different
elements that are key to create a
great place to work and determine
workplace satisfaction including
Company culture, remuneration
policy, HR practices and
environment;
• councils: regular meetings including
multiple departments. These
meetings are organised around a
specific subject such as Operational
Development or Product
Development. Councils discuss
current practices, improvement
areas and new innovations.
Franchisees are also invited to
these Councils. These meetings
are a great opportunity to hear
different voices from all over
the organisation and empower
employees to improve business
processes;
• regular employee meetings:
monthly meetings with all
restaurant managers to update
them on new developments and
to receive their feedback on the
operational calendar;
Management report 18 | DP Eurasia N.V. Annual Report and Accounts 2019
Product
The Group’s store menu offers
globally recognised pizza products,
which are strategically tailored to
local tastes.
DP Eurasia N.V. Annual Report and Accounts 2019 | 19
The Group maintains a focused
menu in all of the countries in which
it operates, which is designed to
present a value‑based, attractive
and high‑quality offering to
customers, while simplifying and
expediting the order‑taking and food
preparation processes. The Group
believes that its focused menu
creates a strong identity for its
products among consumers, as well
as improving operating efficiency
and maintaining food quality and
consistency. The Group’s system
stores purchase their ingredients
(such as pizza dough, sauces
and toppings), their supplies
(such as beverages) and their
materials (such as pizza boxes,
menus and uniforms) from the
Group’s commissaries (other than
in Azerbaijan and Georgia, where the
Group sometimes approves locally
sourced substitutes).
Thus, the Group seeks to centralise
the supply of key ingredients,
which gives its products a consistent
taste and presentation across
all geographies.
The Group adapts its product
offering to the various cultures
and consumption patterns in the
different countries in which it is
present. For example, pork products
are not used in the system stores in
Azerbaijan and Turkey.
The Group believes that its disciplined
approach to product innovation is a
key differentiator from its competitors
and is based on:
• an understanding of customer
preferences based on data from
the Group’s customer relationship
management (“CRM”) database,
direct customer questionnaires in
stores and market research;
• strict food cost and ingredient
planning in creating new recipes;
and
• in‑store pilot testing for four to
eight weeks before rollout across
the system stores.
The Group’s system stores offer a
variety of side dishes (which use
the same oven equipment as pizzas)
which expands its total offering
and contributes to increased average
ticket price. The Group offers soft
drinks from Coca‑Cola Company
brands in Turkey, Georgia and
Azerbaijan and PepsiCo brands in
Russia. The Group’s dessert selection
features items such as mosaic cakes
(which are chocolate bites), chocolate
pizza with KitKat® and a chocolate
soufflé product – another Group
innovation which has been adopted in
other territories within the worldwide
Domino’s System.
The Group’s store menu offers
globally recognised pizza products,
which are tailored to local tastes.
It also offers complementary
products such as oven‑baked
sandwiches, wraps, chicken, other
side dishes and desserts – some of
which have been developed by the
Group’s innovation centre in Istanbul
and subsequently adopted by other
master franchisees of Domino’s Pizza
around the world.
In 2019, the Group’s new product
innovations started with a value
priced pizza – named Süperos,
which achieved 30% pizza mix and
81% overall liking for the first four
weeks in Turkey. Following that, the
Chicken Pizza was launched in order
to increase variety and to reach
the chicken‑lovers subsegment via
addressing consumers’ innovation
expectations. In order not to lower
the price level of the pizza category,
the Group accelerated alternative
product innovations at entry price
levels. To take share from the growing
wrap market in Turkey, the Group
added three different wraps
(three cheese, mixed ingredient,
chicken) which were tailored to
local tastes and named “Dürümos”.
Dürümos reached 10% of Turkish
system sales, and it was the first time
that a non‑pizza product reached that
mix level. Moreover, the oven‑baked
sandwich line was also extended
by launching four new varieties
such as three cheese, sausage and
potato, tuna and mixed ingredients.
To meet consumer needs in the side
item category, the Group launched
a chocolate pizza with KitKat® and
also updated its salad and potato
wedges offering.
Management report 20 | DP Eurasia N.V. Annual Report and Accounts 2019
Digital
A key differentiator for the Group
is its proprietary online ordering
platforms.
DP Eurasia N.V. Annual Report and Accounts 2019 | 21
DP Eurasia’s online capabilities
and platform present many
tangible benefits, including ease
of ordering, higher order frequency,
reduced in‑store labour cost and
increased consumer loyalty and
brand awareness.
The Group’s online approach is to
use a single back‑end platform for
each country in which it operates,
thereby driving sales centrally to
its stores. Therefore, the digital
solutions development process
was centralised in Turkey to develop
in‑house multi‑tenant applications
with multi‑lingual ability, including
responsive desktop/mobile website
functionality with design trends,
striving to offer a superior user
experience for all its countries of
operation. The new websites for
Turkey and Russia were launched in
September 2018 and the first quarter
of 2019, respectively.
The Group aims to increase online
sales as a proportion of system
sales. By growing the volume of
orders placed through its online
platform, growth in system sales and
franchisees’ results are expected to
become less reliant on the initiatives
of the franchisees, enabling them
to focus on the operational aspects
of their role and allow the Group
greater control over features such
as pricing and sales across its
system stores. Orders placed using
the Group’s online platform have a
higher customer ordering frequency
than orders placed offline, mainly
due to the convenience associated
with the ease of ordering online and
more targeted marketing initiatives.
The Group’s online platform also
provides “push” opportunities,
both through in‑app and web‑based
browser notifications. These targeted
advertising initiatives are more
effective than traditional advertising
given the impulsive nature of the
offering and are less costly to
implement and quicker to roll out
than the Group’s traditional national
marketing campaigns.
There are initiatives that the Group
has implemented to support its
online strategy:
GPS tracker
The GPS system project, “Sıcak Takip”
(“Hot Pursuit” in English) was born to
use the delivery fleet efficiently and
to improve customer satisfaction.
“Sıcak Takip” shows the location of
drivers and orders to the customers
on digital channels. This system is a
first in the fast‑food delivery sector
in Turkey. “Sıcak Takip” was launched
in January 2019 at all stores with
three main KPIs – efficiency,
customer engagement and safety
of drivers – by developing customer
experience, real‑time monitoring and
reporting applications.
Loyalty strategy
The Group started a loyalty
programme in Turkey for delivery
via only its mobile apps at the end
of 2017 and has since extended
this to the websites in February
2018. The Group will start trialling
the loyalty programme in Russia
during 2020.
Information technology
The monitoring infrastructure has
been set up and the system was
established for effective monitoring
of all platforms so that all security
and performance actions are taken
quickly and tracked. The Group
improved its security measures on
platforms such as the SAP ecosystem
and Azure Cloud. Russian Azure
Cloud was implemented in 2019.
Apps
iOS and Android app shares increased
compared to last year due to more
effective marketing campaigns and
the loyalty programme. Occasional
campaigns such as Black Friday,
New Year’s and Domino’s Turkey
Pizza Days positively affected digital
channels’ performance and increased
conversion rates.
The Group uses the Domino’s PULSE™
point‑of‑sale system in all of its
system stores. This computerised
management information system
assists in improving store operating
efficiencies, for example, by
streamlining the process for taking
orders and inventory management.
It also provides the Group with timely
access to financial data and reduces
administrative time and expense
at the store level. The Group has
desktop and mobile‑based access
to data for monitoring and analysing
store performance daily and on a
real‑time basis.
The Group owns all its online ordering
platforms and related software,
namely its website‑based and
mobile‑based platforms, including
its mobile applications and website
optimised for mobile devices.
The Group also maintains a
CRM database, in line with data
protection requirements, in which
it has more than five million active
customers (defined as customers
who have placed an order with a
system store within the last twelve
months). The Group initiated a
two‑year cybersecurity programme
with Deloitte Turkey Cyber Risk
Services in order to protect the
sensitive information that it acquires
in the function of its operations.
The Group’s cybersecurity
programme aims to protect the
Group’s systems and personal
data in Turkey against internal and
external cyber risks and covers the
headquarters, corporate stores
and commissaries. As part of the
programme, the Group has focused
on training personnel, identifying
data inventory, defining security roles
and responsibility, investing in data
loss prevention tools, implementing
security information and event
management technology, establishing
a Turkish security operations centre
and the implementation of an identity
management process to set roles
and manage all access rights.
Management report 22 | DP Eurasia N.V. Annual Report and Accounts 2019
Strategic review
DP Eurasia achieved strong operational growth in the
year, with a further 41 stores added to the store portfolio.
System sales
(in millions of TRY, unless otherwise indicated)
Group system sales(1)
Group
Turkey
Russia
Azerbaijan & Georgia
Group system sales like-for-like growth(2)
Group(8)
Turkey
Russia (based on RUB)
Store count
Turkey
Russia
Azerbaijan
Georgia
Total
For the year
ended 31 December
2019
2018
Change
1,370.3
1,125.3
21.8%
845.7
503.3
21.2
736.1
14.9%
373.5
34.8%
15.7
34.8%
10.7%
10.3%
13.1%
0.7%
9.3%
16.0%
As at 31 December
2019
2018
Corporate Franchised
Total Corporate Franchised
123
121
—
—
427
82
8
4
550
203
8
4
137
101
—
—
398
78
6
4
Total
535
179
6
4
244
521
765
238
486
724
DP Eurasia N.V. Annual Report and Accounts 2019 | 23
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:
Store
Online
For the year ended 31 December
2019
2018
Turkey
Russia
Total
Turkey
Russia
32.0%
18.0%
27.8%
42.4%
23.9%
Total
37.1%
– Group’s online platform
28.5%
80.5%
47.0%
30.2%
76.1%
44.7%
– Aggregator
– Total online
Call centre
Total(6)
35.7%
1.5%
22.8%
24.2%
—
16.1%
64.2%
82.0%
69.9%
54.4%
76.1%
60.8%
3.8%
—
2.3%
3.1%
—
2.1%
100%
100%
100%
100%
100%
100%
Management report
24 | DP Eurasia N.V. Annual Report and Accounts 2019
Strategic review continued
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:
Group online system sales like-for-like growth(2,7)
Group(8)
Turkey
Russia (based on RUB)
For the year
ended 31 December
2019
2018
29.3%
35.4%
32.6%
33.7%
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
(in millions of TRY)
Revenue
Cost of sales (excl. IFRS 16)
Gross profit (excl. IFRS 16)
General administrative expenses (excl. IFRS 16)
Marketing and selling expenses
Other operating expenses, net (excl. IFRS 16)
Operating profit (excl. IFRS 16)
Foreign exchange (losses)/gains (excl. IFRS 16)
Financial income (excl. IFRS 16)
Financial expense (excl. IFRS 16)
(Loss)/Profit before income tax (excl. IFRS 16)
Tax expense (excl. IFRS 16)
(Loss)/Profit after tax (excl. IFRS 16)
Group adjusted EBITDA(3) (excl. IFRS 16)
Group adjusted net income(4) (excl. IFRS 16)
Group adjusted net debt(5) (excl. IFRS 16)
Group adjusted EBITDA(3)
Group adjusted net loss(4)
Turkey adjusted EBITDA(3)
Turkey adjusted EBITDA(3) (excl. IFRS 16)
Russia adjusted EBITDA(3)
Russia adjusted EBITDA(3) (excl. IFRS 16)
For the year ended
31 December
2019
2018
Change
980.2
856.9
14.4%
(645.7)
(566.3)
14.0%
334.5
290.6
(154.0)
(136.1)
15.1%
13.1%
(137.0)
(104.3)
31.4%
15.1
58.5
6.8
2.4
3.1 385.9%
53.3
(18.8)
9.8%
n.m.
5.5
(57.0)%
(49.3)
(43.9)
12.4%
18.4
(3.9)
n.m.
(14.8)
(7.2)
105.1%
3.6
(11.1)
n.m.
124.5
110.6
12.6%
(7.1)
n.m.
2.9
226.5
189.8
154.6
110.6
(6.3)
(7.1)
134.6
108.7
63.9
24.5
96.5
96.5
23.9
23.9
n.m.
n.m.
n.m.
12.6%
n.m.
2.7%
DP Eurasia N.V. Annual Report and Accounts 2019 | 25
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.
Management report 26 | DP Eurasia N.V. Annual Report and Accounts 2019
Strategic review continued
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.
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)
Group
Turkey
Russia
Azerbaijan and Georgia
Group system sales like-for-like growth(2)
Group(8)
Turkey
Russia (based on RUB)
For the two
months ended
29 Feb 2020
21.7%
26.1%
14.2%
40.5%
13.9%
21.2%
(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.
DP Eurasia N.V. Annual Report and Accounts 2019 | 27
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:
• hiring a new management team comprising CEO, COO and CFO;
• making long term improvements to product, service and technology and further investment in the brand;
• adopting a new marketing strategy making use of celebrity endorsement, cluster‑based pricing, different channel mix,
and simpler, price‑led advertisements;
• launching new products at entry level pricing;
• creating regional castles – starting with the Krasnodar area in the south;
• expanding the use of corporate stores as well as franchise stores on to the aggregator platform; and
• cost cutting measures.
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 18 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.
Management report 28 | DP Eurasia N.V. Annual Report and Accounts 2019
Management report
DP Eurasia is committed to conducting all of
its business and relationships with dedication,
professionalism and integrity.
The business ethics of the Group are based on
compliance with criteria which promote the values,
culture and management model of DP Eurasia,
encouraging respect for individuals and their rights.
Structure
DP Eurasia N.V.
DP Eurasia N.V. Annual Report and Accounts 2019 | 29
Fidesrus B.V.
Pizza
Restaurants LLC
Fides Food
Systems B.V.
Pizza
Restaurantları
A.Ş.
Group and subsidiaries
The Group’s organisation
and nature of activities
DP Eurasia N.V. is a limited liability
company (naamloze vennootschap)
incorporated under the laws of the
Netherlands on 18 October 2016.
The principal activity of DP Eurasia
consists of acting as a holding
company.
DP Eurasia operates corporate stores
and franchised stores in Turkey and
Russia, including provision of technical
support, control and consultancy
services to the franchisees.
As at 31 December 2019, the
Group operated 765 stores (521
franchised stores, including eight in
Azerbaijan and four in Georgia, and
244 corporate stores).
Subsidiaries
DP Eurasia has a total of four fully
owned subsidiaries. The entities
included in the scope of the
consolidated financial information
and nature of their business are
as follows:
Subsidiaries
Pizza Restaurantları A.Ş.
(“Domino’s Turkey”)
Pizza Restaurants LLC
(“Domino’s Russia”)
Fidesrus B.V. (“Fidesrus”)
Fides Food Systems B.V.
(“Fides Food”)
2019 Effective
ownership (%)
2018 Effective
ownership (%)
Registered
country
Nature of
business
100
100
100
100
100
100
Turkey
Food delivery
Russia
Food delivery
100 The Netherlands Investment company
100 The Netherlands Investment company
Management report 30 | DP Eurasia N.V. Annual Report and Accounts 2019
Management report continued
Markets
Turkey
The Group was founded in Turkey,
with its first store opening in Istanbul
in 1996. Since then the Group has
expanded rapidly, opening its
100th store in Istanbul in 2008.
The Group is the largest pizza
delivery company in Turkey in terms
of system sales and number of stores.
As at 31 December 2019, based on
the Group’s data on competition,
the Group’s store network in Turkey
was more than four times larger than
the next largest chained competitor
in the pizza sub‑segment, and
larger than the next seven chained
pizza competitors combined,
with 550 stores.
Russia
Russia is the Group’s second largest
market. The Group has improved its
market position since acquiring the
exclusive master franchise rights in
2012. As at 31 December 2019, based
on the Group’s data on competition
the Group had the third‑largest
store network in the chained
pizza sub‑segment in Russia with
203 stores, representing a more than
ten times increase in the number of its
stores since 2014. In Moscow and the
Greater Moscow region, the Group
estimates that it was the largest
player by number of stores as at
31 December 2019. The Group started
to expand outside of Greater Moscow
in December 2017.
Azerbaijan and Georgia
The Group was granted the exclusive
master franchise of the Domino’s
System for Azerbaijan and Georgia
and has since gone on to open eight
and four stores, respectively.
Store growth
Number of stores at period end
DP Turkey
DP Russia
+58
451
19
+68
383
13
+94
+70
289
432
370
+59
219
+30
160
+27
103
130
724
+41
643
+81
179
765
203
+76
121
567
72
509
43
+58
466
495
522
545
562
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Source: Company information
DP Eurasia N.V. Annual Report and Accounts 2019 | 31
Environmental Sustainability and Food Safety
Food safety
Food safety is an integral part of the
Group’s business.
As part of the food safety model, our
Supply Chain Centres (commissaries)
are certified on food safety.
• In Russia, the Moscow commissary
and stores are certified to HACCP(1)
(Hazard Analysis and Critical
Control Point).
• In Turkey, all four commissaries are
certified to ISO 22000(2).
The Group’s commissaries are
annually audited by Domino’s Pizza
International in terms of quality,
food safety and occupational health
and safety. The results of the 2019
commissary audits were over 92%
in compliance in Russia (4 stars)
and over 96% in compliance in
Turkey (5 stars) with Domino’s Pizza
International standards.
The Group has been auditing
the stores in terms of operational
evaluation, food safety and
health and safety requirements.
Moreover, as of 2019, Domino’s Pizza
International and the Group have
started to conduct Food Safety
Evaluation Audits in the stores
to monitor compliance with food
safety requirements.
Environment and energy
The Group continuously
works on energy efficiency
and environmental projects to
support sustainability activities.
Annually, in Domino’s Pizza Turkey,
energy efficiency KPIs are set and
monitored on a monthly basis by
the Supply Chain Centre management
team. For each equipment or
infrastructure investment, energy
efficiency is one of the main drivers
in the project approval process.
Supply Chain Centres are fully
compliant with regulations and
we are working with environmental
consultants to ensure “zero
environmental issue” for all sites.
Projects in energy efficiency
and production waste reduction
• Fast bake upgrade for pizza
ovens – 95% of ovens used in
stores have been upgraded with
a fast bake finger system which
is engineered specifically for the
Turkish market, alongside a menu to
decrease pizza baking time by 30%.
As a result, energy consumption
decreased by 2kW of electricity
and 3.4m3 of gas per store per day,
which equates to a reduction in up
to 380,000kW of electricity and
648,000m3 of gas per year.
• Production efficiency projects have
reduced production waste by 5.9%
in 2019 versus 2018 and 9.4% in
2018 versus 2017.
• Waste water treatment – on‑site
waste water treatment has been
installed in the Gebze Supply
Chain Centre and active since
2019. Waste water conditions are
fully compliant with municipality
requirements for discharge.
• Energy efficiency automation in
stores – pilot application has been
started in ten stores for minimising
energy consumption during
off‑periods.
• Recycling of packaging
material – all waste packaging
materials derived from warehouse
and picking operations are sent
to licensed recycling companies.
Contaminated packaging is sent
to a specialised hazardous waste
treatment company to be recycled.
• System for reduction in mileage –
routing is centrally managed in each
Supply Chain Centre to optimise the
distance covered by our delivery
fleet. For the cold chain truck fleet,
dynamic routing software has been
used to maximise truck utilisation
and reduce fuel consumption since
2015. All orders are consolidated,
and loads are simulated in
the system before being sent
to warehouse teams. Routes
change every day for maximum
efficiency according to demand
fluctuations and changing store
locations (if any). Truck fill rates are
monitored for Supply Chain Centres
to eliminate inefficient deliveries on
a monthly basis. A specific online
GPS tracking system is used to
ensure trucks are on the route
determined by the routing system.
• Plastic bag usage – plastic bag
usage in stores reduced by 56% as
a result of a revised retail packaging
policy in the Turkey market.
2020 sustainability plans
Domino’s Pizza Turkey is planning to
implement the following project:
• Water discharge from clean
water filtration units in Supply
Chain Centres is planned to be
accumulated in clean water tanks
and will be used in site cleaning.
As per the project plan, recycled
water is expected to decrease water
consumption by 4.5%.
(1) HACCP is an internationally recognised system for reducing the risk of safety hazards in food.
(2) ISO 22000 is a food safety management system.
Management report 32 | DP Eurasia N.V. Annual Report and Accounts 2019
Remuneration report
Statement from the Chairman
of the Remuneration Committee
DP Eurasia N.V. Annual Report and Accounts 2019 | 33
Dear Shareholder
Our Directors’ Remuneration Policy
(the “Policy”) was approved at the
2018 Annual General Meeting (“AGM”)
and, as it continues to operate as
intended, the Remuneration Policy
will remain in use until our 2021
AGM. All payments to Directors
during 2019 were consistent with
the Remuneration Policy.
2019 pay decisions
Executive Directors’ remuneration
for 2019 is set out in the Total
Remuneration table on page 45.
As the performance period for
the first LTIP award granted post
IPO does not end until 2020, the
Chief Executive Officer’s variable
remuneration for 2019 consists only
of annual bonus.
In this remuneration report,
we provide details of how we
implemented the Remuneration
Policy in 2019 and how we intend to
do so in 2020. We have highlighted
below some of the key decisions that
the Remuneration Committee has
made during the past year.
Remuneration principles
Implementation of the Policy is
designed with the following principles
in mind:
• alignment with strategy –
consistent with our growth
strategy, growth in EBITDA is the
key measure currently used in our
variable remuneration plans;
• complement our mission of
delivering sustainable long-term
value for shareholders – share
awards granted under the LTIP
are a key part of the remuneration
package for our senior executive
team. Additionally, the Chief
Executive Officer’s commitment
to retain at least 5,000,000 shares
during the current Remuneration
Policy ensures his direct alignment
to the goal of delivering sustainable
long-term value; and/or
• deliver remuneration levels that are
justifiable to internal and external
stakeholders – the Board is acutely
conscious of the importance of
there being support for senior
executive remuneration levels
from employees, shareholders and
society more widely. Accordingly,
remuneration decisions include a
consideration of factors including
internal pay ratios and scenario
analyses as well as feedback
received from stakeholders.
As disclosed in the 2018 Annual
Report, our original intention was
that the Chief Executive Officer’s
2019 annual bonus should be wholly
determined by Group EBITDA
performance. As previously disclosed,
the General Manager of Russian
Operations resigned during 2019,
with the Chief Executive Officer
taking temporary control of Russian
operations. In light of this change,
the Remuneration Committee
resolved that the structure of the
Chief Executive Officer’s 2019 annual
bonus should be amended to better
align with his revised responsibilities
and strategic priorities for the year.
This revised structure involved 75%
of the bonus (up to 60% of salary)
being determined by Group EBITDA
performance with the remaining 25%
of the bonus (up to 20% of salary)
based on the successful resolution of
critical issues relating to franchisee
management.
Despite the challenges faced,
especially in Russia, it has been
another successful year, with
double-digit growth in Group
revenue, adjusted EBITDA and
system sales from a combination
of like-for-like growth and store
openings. Issues with Russian regional
franchisees have been successfully
resolved with the Group negotiating
the acquisition of a majority of stores
in the region. The resulting bonus
payout to the Chief Executive Officer
is 32.6% of salary (further details
of which are set out on page 46)
which the Remuneration Committee
felt was a fair reflection of overall
performance during the year.
Implementation of the
Remuneration Policy in 2020
Our strategy in 2020 will be to
continue to place emphasis on
innovation and online growth,
store growth, increased profitability
and international expansion on an
opportunistic basis.
The Chief Executive Officer’s
remuneration framework remains
broadly unchanged in 2020 with the
only alterations being a reversion
to the annual bonus being based
wholly on Group EBITDA,
consistent with Group strategy,
and a salary adjustment. His 2019
salary comprised an amount of
TRY 2,137,235 paid by the Turkish
business and a separate amount
of EUR 25,000 paid by the Dutch
holding company. The element of
salary paid in Turkish Lira has been
reviewed by reference to the salary
settlement for other employees
based in Turkey and Turkish inflation.
Following this review, the element of
the Chief Executive Officer’s salary
paid in Turkish Lira for 2020 will be
TRY 2,393,703 – an increase of 12%
compared to an average increase
for other Turkish employees of 12%.
The element of salary paid in Euro
remains unchanged. We would
highlight that, due primarily to the
depreciation of the Turkish Lira,
the Chief Executive’s 2020 salary
is currently worth 4% less in Pound
Sterling than his current salary was
when set at the start of 2019.
The Remuneration Committee
carefully considered, and sought
shareholder feedback on, the 2020
LTIP award to be granted to the
Company’s management team.
We are aware that shareholder
guidance encourages a reduction in
the size of an LTIP award following a
share price fall of the nature that the
Company has recently experienced.
However, we are also conscious
that neither of the two LTIP awards
granted since the IPO are expected
to deliver much value to management
(a consequence of the stretching
EBITDA targets attached to the
awards and the share price reduction)
and therefore provide limited
incentivisation.
Management report 34 | DP Eurasia N.V. Annual Report and Accounts 2019
Remuneration report continued
Our remuneration practices are
consistent with the principles of
provision 40 of the UK Code.
Changes to LTIP rules
As outlined in our notice of the
2020 AGM, we will seek shareholder
approval to make a number of
changes that will more closely align
the rules of the LTIP and the ADBP
with standard UK practice. None of
the changes require any change to
the Remuneration Policy. We have
discussed these proposed changes
with our major shareholders.
Summary
We value all feedback from
shareholders and look forward
to receiving your support at the
forthcoming AGM, where there will
be an advisory vote on our annual
remuneration report (pages 44 to
49), so shareholders have a formal
opportunity to provide their feedback
on our remuneration practices.
Tom Singer
Chairman of the
Remuneration Committee
26 March 2020
Implementation of the
Remuneration Policy in 2020
continued
The Remuneration Committee’s view
is that it is critical that management
remain properly incentivised to
improve the financial performance
of the business. This position is
supported by the Board members
appointed by our largest shareholder
(Turkish Private Equity Fund II L.P.)
given the macroeconomic headwinds
experienced since the first half of
2019. We will therefore award the
Chief Executive Officer a 2020 LTIP
award over shares worth 100% of
salary (compared to his previous LTIP
awards over shares worth 150% of
salary (May 2018) and 100% of salary
(May 2019)). Notwithstanding the
share price fall, the Remuneration
Committee believes that this award
level remains appropriate because
vesting will continue to be subject
to stretching EBITDA targets and
also because the other elements
of the Chief Executive Officer’s
remuneration package are modest
for a UK listed company.
There is no change salary adjustment
to the Company Secretary’s
remuneration arrangements for 2020.
Compliance with the UK
Corporate Governance Code
As a Dutch incorporated company,
our remuneration practices,
disclosure and governance are
compliant with Dutch law and the
Dutch Corporate Governance Code.
However, we recognise that many of
our shareholders are UK-based and,
accordingly, we also aim to comply
with UK best practice. Following
the introduction of the 2018 version
of the UK Code, the Remuneration
Committee has considered its
implications for DP Eurasia’s
remuneration arrangements.
• Release period for LTIP awards
– LTIP awards currently vest on
the third anniversary of grant.
The Non-Executive Directors
considered whether future awards
should be subject to an additional
two-year holding period after
vesting, as stated in the UK Code.
Given the requirement under our
Remuneration Policy for the Chief
Executive Officer to hold at least
5,000,000 shares (based on our
share price as at 31 December 2019,
this represents a holding worth
more than 8.9 times his salary), the
Non-Executive Directors concluded
he is already firmly aligned with
other long-term shareholders and
that it was unnecessary to add a
further layer of alignment in the
form of a holding period.
• Post-employment shareholding
guideline – under our current
Remuneration Policy, LTIP awards
for a ‘good leaver’ would normally
be released on the normal
vesting date with no acceleration.
This ensures alignment of the
interests of senior executives
following termination of their
employment and the interests of
other shareholders. As practice
in this area continues to evolve,
the Remuneration Committee will
review this approach when the
Remuneration Policy is next put
forward for a formal shareholder
vote at the 2021 AGM.
• Pension provision – consistent with
the UK Code, the Chief Executive
Officer receives the same level of
pension provision as our Turkish
and Russian employees (zero).
The Company Secretary is our
only Dutch employee and receives
a remuneration package comprising
salary and pension/benefits
and no variable remuneration.
The Remuneration Committee
is satisfied that this arrangement
remains appropriate for this
particular role and that her absolute
level of annual pension provision
(€35,400) is not excessive, being
lower quartile for an Executive
Director of a UK listed company.
DP Eurasia N.V. Annual Report and Accounts 2019 | 35
Directors’ remuneration policy
DP Eurasia’s Directors’ remuneration policy was approved
at the 2018 AGM with over 97% support from shareholders.
Remuneration components
The remuneration structure for the
Executive Directors can consist
of: (a) base salary; (b) benefits;
(c) pension; (d) annual and deferred
bonus; and (e) long-term incentives.
To support this aim, the Board has
adopted two incentive plans: the
annual and deferred bonus plan (the
“ADBP”) and the long-term incentive
plan (the “LTIP”). The remuneration
structure of the Non-Executive
Directors will consist of a fixed fee.
DP Eurasia’s Directors’
remuneration policy (the
“Remuneration Policy”)
It is intended that the remuneration
policy will apply for three years,
although the Board may seek
approval for a new Remuneration
Policy at an earlier point, if it is
considered appropriate.
Remuneration principles
The aim of DP Eurasia is to attract,
retain and motivate the best talent
to help ensure continued growth
and success in the listed company
environment.
The Remuneration Policy aims to
align the interests of the Executive
Directors to the long-term
interests of shareholders and
supports a high-performance
culture with appropriate reward
for superior performance without
creating incentives that will
encourage excessive risk taking
or unsustainable performance.
The Remuneration Policy also sets
out the remuneration structure of
the Non-Executive Directors.
In accordance with Dutch corporate
governance, the remuneration of:
• the Executive Directors shall be
determined by the Non-Executive
Directors with due observance of
the Remuneration Policy; and
• the Non-Executive Directors shall
be determined by the General
Meeting upon a proposal by the
Board with due observance of the
Remuneration Policy,
each at a level that is considered by
the Remuneration Committee to be
appropriate for the size and nature
of the business, in order to ensure
that the policies and remuneration
structure are appropriate for the
listed company environment.
The Remuneration Committee will
review annually the remuneration
arrangements for the Executive
Directors and key senior employees
by taking into consideration:
• business strategy over the period;
• overall corporate performance;
• market conditions affecting
the Group;
• the recruitment market and
the remuneration of the overall
employee population;
• changing practice in the markets
where the Group competes for
talent;
• the pay ratios within the Group; and
• the views of institutional
shareholders and their
representative bodies.
Management report 36 | DP Eurasia N.V. Annual Report and Accounts 2019
Directors’ remuneration policy continued
Remuneration Policy table for Executive Directors
Component
Purpose and link to strategy
Operation
Maximum
Performance framework
Base salary
Core element of remuneration set at
a level to attract and retain Executive
Directors with the experience and
expertise needed to develop and
implement DP Eurasia’s long-term
strategy.
Benefits
To provide market-competitive benefits.
An Executive Director’s base salary is set on appointment
and reviewed annually or when there is a change in position
or responsibility.
When determining an appropriate level of salary, the
Non-Executive Directors consider:
• the individual Executive Director’s role, experience and
performance;
• the general operational performance of the Group and
individual performance (if applicable);
• the economic environment and the sustainable development
of the Group;
• remuneration structures in companies that are comparable in
terms of business activities, complexity and size;
• any change in scope, role and responsibilities; and
• remuneration practices within DP Eurasia.
Individuals recruited or promoted to the Board may, on occasion,
have their salaries set below the targeted policy level until they
become established in their role. In such cases, subsequent
increases in salary may be higher than the general rises for
employees until the target positioning is achieved.
Benefits are role specific and take into account local market
practice.
The Executive Directors are eligible to receive benefits (or an
equivalent cash allowance) including private health cover, medical
disability insurance, life assurance, education, communication and
IT allowances, mobility allowance or a company car.
Executive Directors are entitled to reimbursement of reasonable
expenses.
The Non-Executive Directors recognise the need to maintain
suitable flexibility in the benefits provided to ensure they support
the objective of attracting and retaining high-calibre personnel.
Additional benefits may therefore be offered, such as reasonable
tax advice/support, relocation allowances on recruitment and
other reasonable costs incurred by an individual in relation to
their appointment.
To avoid setting the expectations of Executive Directors and other employees, there is
None
no overall maximum salary for Executive Directors under the Remuneration Policy.
Any increase in salaries will be determined by the Non-Executive Directors, taking into
account the factors stated in this table and the following principles:
• salary increases for Executive Directors will typically be in line with the average salary
increase (in percentage of salary terms) for other permanent employees in the country
in which the Executive Director is resident;
• increases may be made above this in certain circumstances, such as:
• progression within the role;
• increase in scope and responsibility of the role;
initially; and
• increase in size and complexity of the Group.
• increase in experience where an individual has been recruited on a lower salary
There is no overall maximum level, but benefits are set at an appropriate level for the
None
specific nature of the role and depend on the annual cost of providing individual benefits.
Pension
To provide market-competitive
retirement benefits.
Executive Directors are eligible to receive a contribution to their
personal pension arrangements or direct to their pension plans.
The Chief Executive Officer receives no pension provision and the Company Secretary
None
receives a cash allowance of 36% of base salary.
Alternatively, Executive Directors may receive a cash allowance in
lieu of pension.
For any future Executive Director appointment, pension provision would be capped at
20% of base salary. This limit would also apply if the current Chief Executive Officer were
LTIP
To link reward to the achievement of
long-term performance and strategic
objectives of DP Eurasia and to retain
Executive Directors
The Executive Directors may receive LTIP awards which will
usually be made in the form of a contingent award of shares or
nil-cost options (and may also be granted as share options or
settled in cash).
Normal maximum value of 100% of annual base salary based on the market value at
Vesting of LTIP awards is dependent
In exceptional circumstances, an award worth up to 150% of annual base salary may
to receive pension provision.
the date of grant.
be granted.
Vesting of the award is dependent on the achievement of
performance targets, typically measured over a three-year period.
The Non-Executive Directors have the discretion to apply a
holding period of two years post-vesting.
An additional payment (in the form of cash or shares) may be
made in respect of vested shares to reflect the value of dividends
which would have been paid on those shares during the period
since award (this payment may assume that dividends had been
reinvested in DP Eurasia shares on a cumulative basis).
on the achievement of key financial,
strategic and/or operational measures
determined by the Non-Executive
Directors ahead of each award.
For achieving a “threshold” level of
performance against a performance
measure, no more than 25% of the
award will vest.
Vesting then increases on a sliding
scale to 100% for achieving a stretching
maximum performance target.
DP Eurasia N.V. Annual Report and Accounts 2019 | 37
Remuneration Policy table for Executive Directors
Component
Purpose and link to strategy
Operation
Maximum
Performance framework
Base salary
Core element of remuneration set at
An Executive Director’s base salary is set on appointment
a level to attract and retain Executive
and reviewed annually or when there is a change in position
To avoid setting the expectations of Executive Directors and other employees, there is
no overall maximum salary for Executive Directors under the Remuneration Policy.
None
Directors with the experience and
or responsibility.
expertise needed to develop and
implement DP Eurasia’s long-term
strategy.
Any increase in salaries will be determined by the Non-Executive Directors, taking into
account the factors stated in this table and the following principles:
• salary increases for Executive Directors will typically be in line with the average salary
increase (in percentage of salary terms) for other permanent employees in the country
in which the Executive Director is resident;
• increases may be made above this in certain circumstances, such as:
• progression within the role;
• increase in scope and responsibility of the role;
• increase in experience where an individual has been recruited on a lower salary
initially; and
• increase in size and complexity of the Group.
Benefits
To provide market-competitive benefits.
Benefits are role specific and take into account local market
There is no overall maximum level, but benefits are set at an appropriate level for the
specific nature of the role and depend on the annual cost of providing individual benefits.
None
Pension
To provide market-competitive
Executive Directors are eligible to receive a contribution to their
retirement benefits.
personal pension arrangements or direct to their pension plans.
The Chief Executive Officer receives no pension provision and the Company Secretary
receives a cash allowance of 36% of base salary.
None
Alternatively, Executive Directors may receive a cash allowance in
lieu of pension.
For any future Executive Director appointment, pension provision would be capped at
20% of base salary. This limit would also apply if the current Chief Executive Officer were
to receive pension provision.
LTIP
To link reward to the achievement of
The Executive Directors may receive LTIP awards which will
long-term performance and strategic
usually be made in the form of a contingent award of shares or
objectives of DP Eurasia and to retain
nil-cost options (and may also be granted as share options or
Executive Directors
settled in cash).
Normal maximum value of 100% of annual base salary based on the market value at
the date of grant.
In exceptional circumstances, an award worth up to 150% of annual base salary may
be granted.
Vesting of LTIP awards is dependent
on the achievement of key financial,
strategic and/or operational measures
determined by the Non-Executive
Directors ahead of each award.
For achieving a “threshold” level of
performance against a performance
measure, no more than 25% of the
award will vest.
Vesting then increases on a sliding
scale to 100% for achieving a stretching
maximum performance target.
When determining an appropriate level of salary, the
Non-Executive Directors consider:
• the individual Executive Director’s role, experience and
performance;
• the general operational performance of the Group and
individual performance (if applicable);
• the economic environment and the sustainable development
of the Group;
• remuneration structures in companies that are comparable in
terms of business activities, complexity and size;
• any change in scope, role and responsibilities; and
• remuneration practices within DP Eurasia.
Individuals recruited or promoted to the Board may, on occasion,
have their salaries set below the targeted policy level until they
become established in their role. In such cases, subsequent
increases in salary may be higher than the general rises for
employees until the target positioning is achieved.
practice.
expenses.
The Executive Directors are eligible to receive benefits (or an
equivalent cash allowance) including private health cover, medical
disability insurance, life assurance, education, communication and
IT allowances, mobility allowance or a company car.
Executive Directors are entitled to reimbursement of reasonable
The Non-Executive Directors recognise the need to maintain
suitable flexibility in the benefits provided to ensure they support
the objective of attracting and retaining high-calibre personnel.
Additional benefits may therefore be offered, such as reasonable
tax advice/support, relocation allowances on recruitment and
other reasonable costs incurred by an individual in relation to
their appointment.
Vesting of the award is dependent on the achievement of
performance targets, typically measured over a three-year period.
The Non-Executive Directors have the discretion to apply a
holding period of two years post-vesting.
An additional payment (in the form of cash or shares) may be
made in respect of vested shares to reflect the value of dividends
which would have been paid on those shares during the period
since award (this payment may assume that dividends had been
reinvested in DP Eurasia shares on a cumulative basis).
Management report 38 | DP Eurasia N.V. Annual Report and Accounts 2019
Directors’ remuneration policy continued
Remuneration Policy table for Executive Directors continued
Component
Purpose and link to strategy
Operation
Maximum
Annual and
deferred bonus
(“ADBP”)
To link reward to the achievement of
key business objectives of DP Eurasia
for the year.
The Executive Directors may participate in the ADBP, which is
reviewed annually to ensure bonus opportunity, performance
measures and targets and objectives remain appropriate.
The Non-Executive Directors determine the level of bonus to
be awarded at their discretion, taking into account the extent
to which the targets have been met and overall business and
personal performance.
The Non-Executive Directors have discretion to deliver part of
the annual bonus in shares, which will usually be deferred for
three years. Deferred awards are usually granted in the form of
a contingent award of shares or nil-cost options (and may also
be settled in cash). An additional payment (in the form of cash
or shares) may be made in respect of shares which vest under
deferred awards to reflect the value of dividends which would
have been paid on those shares during the deferral period (this
payment may assume that dividends had been reinvested in DP
Eurasia shares on a cumulative basis).
The maximum annual bonus potential is 80% of base salary.
Levels of bonus payout for achieving threshold and on-target performance will be set
each year by the Non-Executive Directors taking into account the degree of stretch in
the performance targets.
Performance framework
The bonus is based on performance
assessed over one year using
appropriate financial and strategic
performance measures that are closely
aligned with DP Eurasia’s strategy and
the creation of value for shareholders.
The majority of the bonus will be
determined by measure(s) of financial
performance.
Shareholding
guideline
To provide long-term alignment with
shareholder interests.
For the duration of this Remuneration Policy, the current
Chief Executive Officer will be required to retain a minimum
of 5,000,000 shares.
Not applicable
Not applicable
Fee arrangements for Non-Executive Directors
Purpose and link to strategy
Operation
Provides a level of fees to support recruitment and retention
of high calibre Non-Executive Directors with the necessary
experience to advise and assist with establishing and
monitoring DP Eurasia’s strategic objectives.
Shareholder approval was taken at the 2018 AGM for a fee
structure that will apply to all Non-Executive Directors.
The Chairman of the Board will receive an all-inclusive fee.
Other Non-Executive Directors, apart from representatives
of Fides Food Systems, will receive a basic Board fee and an
additional fee for acting as the Senior Independent Director or
for chairmanship of a Board Committee.
Expenses incurred by the Non-Executive Directors reasonably
required for the performance of their duties may be reimbursed.
Non-Executive Directors do not participate in any variable
remuneration arrangements and will not be awarded remuneration
in the form of shares and/or rights to shares.
Maximum
associated with specific roles.
Fees are set at an appropriate level that is market competitive and reflective of the responsibilities and time commitment
DP Eurasia N.V. Annual Report and Accounts 2019 | 39
Component
Purpose and link to strategy
Operation
Maximum
To link reward to the achievement of
The Executive Directors may participate in the ADBP, which is
The maximum annual bonus potential is 80% of base salary.
Levels of bonus payout for achieving threshold and on-target performance will be set
each year by the Non-Executive Directors taking into account the degree of stretch in
the performance targets.
Annual and
deferred bonus
(“ADBP”)
key business objectives of DP Eurasia
reviewed annually to ensure bonus opportunity, performance
for the year.
measures and targets and objectives remain appropriate.
Performance framework
The bonus is based on performance
assessed over one year using
appropriate financial and strategic
performance measures that are closely
aligned with DP Eurasia’s strategy and
the creation of value for shareholders.
The majority of the bonus will be
determined by measure(s) of financial
performance.
Shareholding
guideline
To provide long-term alignment with
For the duration of this Remuneration Policy, the current
shareholder interests.
Chief Executive Officer will be required to retain a minimum
of 5,000,000 shares.
Not applicable
Not applicable
Fee arrangements for Non-Executive Directors
Purpose and link to strategy
Operation
Maximum
Provides a level of fees to support recruitment and retention
Shareholder approval was taken at the 2018 AGM for a fee
of high calibre Non-Executive Directors with the necessary
structure that will apply to all Non-Executive Directors.
experience to advise and assist with establishing and
The Chairman of the Board will receive an all-inclusive fee.
monitoring DP Eurasia’s strategic objectives.
Fees are set at an appropriate level that is market competitive and reflective of the responsibilities and time commitment
associated with specific roles.
The Non-Executive Directors determine the level of bonus to
be awarded at their discretion, taking into account the extent
to which the targets have been met and overall business and
personal performance.
The Non-Executive Directors have discretion to deliver part of
the annual bonus in shares, which will usually be deferred for
three years. Deferred awards are usually granted in the form of
a contingent award of shares or nil-cost options (and may also
be settled in cash). An additional payment (in the form of cash
or shares) may be made in respect of shares which vest under
deferred awards to reflect the value of dividends which would
have been paid on those shares during the deferral period (this
payment may assume that dividends had been reinvested in DP
Eurasia shares on a cumulative basis).
Other Non-Executive Directors, apart from representatives
of Fides Food Systems, will receive a basic Board fee and an
additional fee for acting as the Senior Independent Director or
for chairmanship of a Board Committee.
Expenses incurred by the Non-Executive Directors reasonably
required for the performance of their duties may be reimbursed.
Non-Executive Directors do not participate in any variable
remuneration arrangements and will not be awarded remuneration
in the form of shares and/or rights to shares.
Management report 40 | DP Eurasia N.V. Annual Report and Accounts 2019
Directors’ remuneration policy continued
Legacy awards
The Non-Executive Directors reserve
the right to make any remuneration
payments notwithstanding that they
are not in line with this Remuneration
Policy where the terms of the
payment were agreed: (i) before
this Remuneration Policy came into
effect, provided that the terms of the
payment were consistent with the
approved Remuneration Policy at
the time they were agreed; or (ii) at
a time when the relevant individual
was not an Executive Director of
DP Eurasia and, in the opinion of
the Non-Executive Directors, the
payment was not in consideration for
the individual becoming an Executive
Director of DP Eurasia. For these
purposes, “payments” includes the
Non-Executive Directors satisfying
awards of variable remuneration
and, in relation to an award over
shares, the terms of the payment are
“agreed” at the time the award is
granted.
Choice of performance measures
and approach to target setting
Non-Executive Directors set
performance metrics under both the
ADBP and the LTIP which are clearly
aligned to DP Eurasia’s strategy
and are usually part of its KPIs. Any
personal objective performance
measures within the ADBP are
also directly linked to key strategic
objectives.
Targets are set at the start of
each performance period by the
Non-Executive Directors taking into
account relevant internal and external
reference points and are designed to
be appropriately stretching.
Discretion
Non-Executive Directors will operate
the ADBP and LTIP according to their
respective rules, including flexibility in
a number of regards. These include:
• when to make awards and
payments;
• how to determine the size of an
award or a payment, or when and
how much of an award should vest;
• who receives an award or payment;
• how to deal with a change of
control or restructuring of the
Group;
• whether a participant is a good/bad
leaver for incentive plan purposes,
and whether and what proportion
of awards vest and timing of
delivery;
• how and whether an award (or an
award of shares outlined in this
Remuneration Policy that is yet to
be granted) may be adjusted in
certain circumstances (e.g. rights
issues, corporate restructuring,
events and special dividends); and
• what the weighting, measures and
targets should be for the ADBP and
LTIP from year to year.
If an event occurs which causes
the Non-Executive Directors to
determine that a performance
condition is no longer appropriate,
the Non-Executive Directors have
discretion under the rules of the
ADBP and LTIP to substitute or
vary that performance condition in
such manner as is reasonable in the
circumstances and produces a fairer
measure of performance that is not
materially less difficult to satisfy than
if the event had not occurred.
The Non-Executive Directors
may make minor amendments
to the Remuneration Policy (for
regulatory, exchange control, tax or
administrative purposes, or to take
account of a change in legislation)
without obtaining shareholder
approval for that amendment.
Remuneration scenarios
The charts below show hypothetical
values of the remuneration package
for the current Executive Directors in
the Remuneration Policy under three
assumed performance scenarios.
The Remuneration Committee
regularly reviews the impact of
different performance scenarios on
the potential reward opportunity and
payouts to be received by Executive
Directors and the alignment of these
with long-term value creation for
shareholders. The Remuneration
Committee believes that the level of
remuneration that can be delivered in
the various scenarios is appropriate
for the level of performance delivered
and the value that would be delivered
to shareholders.
Aslan Saranga
8,000
LTIP
Annual bonus
Fixed pay
6,000
0
0
0
‘
Y
R
T
4,000
5,062
26%
20%
2,745
7,378
35%
28%
2,000
0
100%
54%
37%
Minimum
Midpoint
Maximum
Frederieke Slot
180
Fixed pay
158
158
158
135
0
0
0
‘
R
U
E
90
100%
100%
100%
45
0
Minimum
Midpoint
Maximum
DP Eurasia N.V. Annual Report and Accounts 2019 | 41
Assumptions
Fixed pay
• Salary: as at 1 January 2020:
Aslan Saranga TRY 2,393,703
plus EUR 25,000; Frederieke Slot
EUR 100,000.
• Pension: Frederieke Slot 36% of
base salary.
• Benefits: estimate based on 2019
reported taxable benefits.
Variable pay
• ADBP: maximum of 80% of base
salary for Aslan Saranga (assumed
half of maximum paid as midpoint);
Frederieke Slot will not participate
in the ADBP in 2020.
• LTIP: maximum award of 100%
of base salary for Aslan Saranga;
(assumed half of maximum vests as
midpoint); Frederieke Slot will not
receive an LTIP award in 2020.
• No share price growth or dividend
accrual considered.
New appointments
In the event of appointing a new
Executive Director to the Board, the
Non-Executive Directors will generally
align their remuneration package with
the Remuneration Policy table set out
in this Remuneration Policy. Where
appropriate, the Non-Executive
Directors may apply their discretion
in the following regards:
• ADBP – in the first year of
employment, different performance
measures and targets may be set
to those of the other Executive
Directors, depending on the timing
and scope of any appointment. In
order to facilitate the recruitment,
the Non-Executive Directors may
deem it necessary to guarantee a
level of bonus, in compensation for
any bonus forgone at their previous
employer. This guarantee will be
limited to the bonus in relation to
the first year of employment;
• LTIP – in the first year of
employment, different performance
measures and targets may be set
for the LTIP to those of the other
Executive Directors, depending
on the timing and scope of any
appointment;
• buy-out awards – to potentially
facilitate the recruitment through
the buy-out of existing awards
and compensation arrangements
that are forfeited on cessation of
employment from their previous
employer, the Non-Executive
Directors will retain the ability to
make a one-off buy-out award.
In doing so, the Non-Executive
Directors will take account of all
relevant factors, including any
performance conditions attached
to incentive awards, the likelihood
of those conditions being met,
the proportion of the vesting/
performance period remaining and
the form of the award (e.g. cash or
shares). The overriding principle
will be that any replacement
buy-out award should be of
comparable commercial value to
the compensation which has been
forfeited. Shareholders will be
informed of any such payments at
the time of appointment;
• in the case of internal appointments
or appointments following the
Group’s acquisition of or merger
with another company or business,
any variable pay element or legacy
arrangements in respect of the
prior role would normally be
allowed to pay out according to its
terms, adjusted as relevant to take
into account the appointment; and
• in the event that a Non-Executive
Director is required to temporarily
take on the role of an Executive
Director, their remuneration may
include any of the elements listed in
the Remuneration Policy table for
Executive Directors.
In the event of the appointment of
a new Non-Executive Director, their
fee will be set in accordance with the
fee arrangements for Non-Executive
Directors as approved by the General
Meeting.
Malus and clawback
Pursuant to Dutch law and best
practice UK corporate governance,
the Non-Executive Directors have the
right to reduce payments that are not
yet paid out and to reclaim payments
pertaining to these events that have
already been paid out.
The Non-Executive Directors may
furthermore adjust the variable
remuneration to an appropriate level
if payment thereof is unacceptable
according to the requirements of
reasonableness and fairness.
The ADBP and the LTIP include
best practice malus and clawback
provisions. Malus is the adjustment
of unpaid bonus and deferred
share awards under the ADBP
and outstanding LTIP awards. The
adjustment may result in the value
being reduced to nil. Clawback is
the recovery of payments or vested
awards under the ADBP and vested
LTIP awards. Malus and clawback
can be enacted as a result of the
occurrence of the following events:
• discovery of a material
misstatement resulting in an
adjustment in the audited accounts
of the Group or any Group
company;
• the assessment of any performance
condition or condition in respect
of an ADBP and LTIP award was
based on error, or inaccurate or
misleading information;
• the discovery that any information
used to determine the cash
payment under the ADBP or the
number of shares subject to an
ADBP or LTIP award was based on
error, or inaccurate or misleading
information;
• action or conduct of a participant
which amounts to fraud or gross
misconduct; or
• events or the behaviour of a
participant have led to the censure
of a Group company by a regulatory
authority or have had a significant
detrimental impact on the
reputation of any Group company
provided that the Board is satisfied
that the relevant participant was
responsible for the censure or
reputational damage and that the
censure or reputational damage is
attributable to the participant.
Clawback may apply to all or part
of a participant’s award and may
be affected, among other means,
by requiring the transfer of shares,
payment of cash or reduction of
awards or bonuses.
Management report 42 | DP Eurasia N.V. Annual Report and Accounts 2019
Directors’ remuneration policy continued
Payment for loss of office
Executive Directors will, under their
contract, not normally be entitled
to be paid a severance payment
upon termination that exceeds one
year’s annual base salary (the fixed
remuneration) in the preceding
financial year. No contractual
severance payment will be awarded
in the event of seriously culpable
or negligent behaviour on the part
of the Executive Director. Aslan
Saranga’s contract provides for an
additional compensation payment of
one year’s annual base salary payable
only in the event that termination of
his employment is due to him being
unable to work because of a health
condition. This is a legacy clause in
Mr Saranga’s Turkish contract which
will not be replicated in any future
Executive Director’s contract.
Where a contract is to be terminated,
the Non-Executive Directors will
determine such mitigation (if
required) as they consider fair
and reasonable in each case.
The Non-Executive Directors reserve
the right to make additional payments
where such payments are made in
good faith in discharge of an existing
statutory or legal obligation (or by
way of damages for breach of such an
obligation); or by way of settlement
or compromise of any claim arising
in connection with the termination
of an Executive Director’s office or
employment. Any such payments may
include, but are not limited to, paying
statutory severance compensation,
any fees for outplacement assistance
and/or the Executive Director’s
legal and/or professional advice
fees in connection with his or her
cessation of office or employment.
Payment would also be made for any
outstanding vacation days unused at
the date of cessation of employment.
The incentive schemes, the ADBP
and the LTIP, are subject to standard
good/bad leaver terms. A good
leaver reason is defined as cessation
in the following circumstances:
death, ill-health, injury or disability,
retirement, redundancy, employing
company ceasing to be a Group
company, transfer of employment
to a company which is not a Group
company or at the discretion of the
Non-Executive Directors.
The table below provides a summary
of the treatment of incentive
remuneration in the event of
cessation of employment or a change
of control before awards vest or
become exercisable (full details are
contained in the ADBP and LTIP plan
rules). Cessation of employment or a
change of control during an award’s
holding period does not affect an
individual’s right to that award.
Plan
Treatment for good leaver
ADBP – cash
bonus
Performance conditions will be measured
at the bonus measurement date. Bonus will
be pro-rated for the period worked during
the financial year unless the Non-Executive
Directors, at their discretion, determine
otherwise.
No bonus payable
in relation to year of
cessation.
Treatment for any
other leaver
Treatment on a change of control/
voluntary winding up/demerger
The Non-Executive Directors have
discretion to determine the bonus
taking into account such factors as
they consider appropriate, including
the extent to which any applicable
performance conditions have been
satisfied. Bonus will be pro-rated for
the period of the financial year elapsed
unless the Non-Executive Directors, at
their discretion, determine otherwise.
The Non-Executive Directors have the
discretion to determine the proportion
of the award which vests taking into
account, among other factors, the
period of time the award has been
held by the Executive Director and
the extent to which any applicable
performance conditions have been
satisfied.
ADBP –
deferred
share bonus
and LTIP
Awards will usually vest on a time-apportioned
basis on the normal vesting date subject
to any relevant performance condition(s)
measured over the full performance period.
Outstanding awards
lapse.
However, in the event of death, or at
the Non-Executive Directors’ discretion,
awards may vest early taking into account
such factors as they consider appropriate,
including the extent to which any applicable
performance conditions have been satisfied.
The Non-Executive Directors have the
discretion, acting fairly and reasonably,
to dis-apply time apportionment.
The Non-Executive Directors will apply discretion where there is an appropriate business case, which will be explained
in full to shareholders. Payments in the event of a change of control will be subject to applicable law in force at the
time of the change of control.
All Non-Executive Directors have an agreement with DP Eurasia ending at the end of the AGM in the third year
following their appointment to the Board. No compensation is payable on termination, except for fees and expenses
accrued to date.
DP Eurasia N.V. Annual Report and Accounts 2019 | 43
Consideration of
shareholder views
DP Eurasia’s major shareholder,
Fides Food Systems Coöperatief
U.A. (“Fides Food Systems”), have
representatives at the Remuneration
Committee; accordingly, the
structure of this Remuneration
Policy has been subject to significant
consultation with them. In addition,
this Remuneration Policy has been
structured with regard to the views
of major institutional shareholders
and leading advisory bodies.
Differences in remuneration
between Executive Directors
and other employees
The overall remuneration package
for the Chief Executive Officer is
structured so that the variable
performance-related pay element
forms a more significant portion
compared to pay for other
employees. This Remuneration
Policy is to ensure there is a clear
link between the individual and
corporate performance achieved, the
value this creates for shareholders
and overall reward. The weighting of
variable pay will vary based on the
seniority of the individual, the role
and specific responsibilities. Whilst
annual bonuses are offered to a large
number of employees, LTIP awards
are targeted at individuals with roles
that have the most influence on
overall value creation.
Internal pay ratio 2019
The internal pay ratio between the
average pay of DP Eurasia employees
vis-à-vis the average pay of the
CEO and all Executive Directors is
calculated based on the average 2019
remuneration (base salary and bonus)
of the Group vis-à-vis the 2019 base
salary and bonus of the CEO and
average base salary and bonus of all
Executive Directors.
The pay ratio is 68:1 (2018: 65:1) for
the CEO Aslan Saranga and 41:1 (2018:
39:1) for all Executive Directors.
For reference, the above pay ratio
disclosure is for compliance with
Dutch corporate governance.
As DP Eurasia has no UK
employees, the Board decided
that it was inappropriate to also
include the pay ratio disclosures
set out in UK legislation
(The Companies (Miscellaneous
Reporting) Regulations 2018).
Consideration of conditions
elsewhere in DP Eurasia
Although there is no active
consultation with employees on
matters relating to the Directors’
remuneration, the Remuneration
Committee and other Non-Executive
Directors are kept informed of
employee pay and employment
conditions and this is factored into
deliberations when setting the
Remuneration Policy for Executive
Directors. The Group-wide salary
increase budget and the proposed
increase for employees of such
country within which the Executive
Directors operate or reside, will be
considered by the Non-Executive
Directors when determining any
basic salary increase for Executive
Directors.
Management report 44 | DP Eurasia N.V. Annual Report and Accounts 2019
Annual remuneration report
The annual remuneration report sets out how DP Eurasia’s Remuneration Policy (pages 35 to 43) will be implemented
in 2020 and how the existing Remuneration Policy was implemented in 2019.
Implementation of the Remuneration Policy in 2020
Executive Directors
DP Eurasia has two Executive Directors: the Chief Executive Officer (Aslan Saranga) and the Company Secretary
(Frederieke Slot). Aslan Saranga has a remuneration package comprising a mixture of fixed pay and variable pay;
Frederieke Slot solely receives fixed pay.
As described in the Statement from the Chairman of the Remuneration Committee, the Remuneration Committee
reviewed Aslan Saranga’s remuneration taking into consideration economic conditions in Turkey. Frederieke Slot’s
remuneration will remain unchanged in 2020.
Base salary
Executive Director
Aslan Saranga
Frederieke Slot
Base salary
2020
2019
TRY 2,393,703
TRY 2,137,235
+EUR 25,000
+EUR 25,000
EUR 100,000
EUR 100,000
Pension and benefits
Frederieke Slot, whose remuneration solely comprises fixed pay, receives a pension allowance worth 36% of base
salary; Aslan Saranga receives no pension allowance. They will additionally both receive other benefits consistent
with those received in 2019.
ADBP
In 2020, Aslan Saranga will be able to receive an annual cash bonus of up to 80% of salary based on Group adjusted
EBITDA. Frederieke Slot will not participate in the ADBP in 2020.
The adjusted EBITDA targets are currently commercially sensitive. However, retrospective disclosure of the targets
and performance against them will be provided in the next remuneration report to the extent that they do not remain
commercially sensitive at that time.
The Remuneration Committee has discretion to override the formulaic outturn of the ADBP where such an approach
is felt to be appropriate taking into account all relevant factors.
Clawback may be applied to a cash bonus up to three years from the determination of the bonus.
LTIP
As explained in the Statement from the Chairman of the Remuneration Committee, Aslan Saranga will receive a standard
level of LTIP award (100% of salary) in 2020. Frederieke Slot will not receive an LTIP award in 2020.
The award will vest on the third anniversary of grant subject to adjusted EBITDA growth targets measured over
the period 2020–22. The selection of stretching EBITDA targets is consistent with our strategic goal of delivering
significant growth potential and long-term value creation.
Threshold
Maximum
Cumulative
adjusted
EBITDA for
2020–22
(TRY m)
456.3
510
Proportion
vesting
0%
100%
A sliding vesting scale will operate for performance between the threshold and maximum target.
The Remuneration Committee has discretion to override the formulaic outturn of the LTIP where such an approach is felt
to be appropriate taking into account all relevant factors.
Malus and clawback may be applied to LTIP awards up to two years following the vesting date.
DP Eurasia N.V. Annual Report and Accounts 2019 | 45
Non-Executive Directors
Non-Executive Director fees were determined by the General Meeting upon proposal of the Board. At the 2018 AGM,
shareholders approved the fee table set out below which would be effective from 1 January 2018. There are no changes
for 2020.
Chairman of the Board
Basic Non-Executive Director fee
Audit Committee Chairman additional fee
Remuneration Committee Chairman additional fee
Senior Independent Director additional fee
Annual
fee (GBP)
150,000
47,500
7,500
7,500
7,000
In addition, the Non-Executive Directors are reimbursed for expenses that are reasonably required for the performance
of their duties.
No fee is paid to Seymur Tarı, İzzet Talu and Aksel Şahin.
Total remuneration
The following table sets out the total remuneration for Executive Directors and Non-Executive Directors for the years
2018 and 2019.
Executive Directors
Non-Executive Directors
Aslan Frederieke
Slot
Saranga
Peter
Williams
Tom
Singer
Seymur
Tari
İzzet
Talu
Aksel
Sahin
Year ending 31 December 2019
Base salary and fees (TRY)
Benefits (TRY)
Pension (TRY)
2,295,945 634,840 1,083,930
502,221
171,479
146,013
—
224,733
—
—
—
—
Total fixed remuneration (TRY)
2,467,424 1,005,586 1,083,930 502,221
Total fixed remuneration (%)
77%
100%
100%
100%
Annual bonus (TRY)
Long-term incentives (TRY)
Total variable remuneration (TRY)
Total variable remuneration (%)
Total (TRY)
Total (local currency)
748,086
—
748,086
23%
—
—
—
—
—
—
—
—
—
—
—
—
3,215,510 1,005,586 1,083,930 502,221
₺3,215,510 €158,400 £150,000 £69,500
Year ending 31 December 2018
Base salary and fees (TRY)
Benefits (TRY)
Pension (TRY)
2,000,000
556,140
957,765 443,764
150,599
130,212
—
200,414
—
—
—
—
Total fixed remuneration (TRY)
2,150,599 896,765
957,765 443,764
Total fixed remuneration (%)
73%
100%
100%
100%
Annual bonus (TRY)
Long-term incentives (TRY)
Total variable remuneration (TRY)
Total variable remuneration (%)
Total (TRY)
Total (local currency)
778,667
—
748,667
27%
—
—
—
—
—
—
—
—
—
—
—
—
2,929,266 896,765
957,765 443,764
₺2,929,266 €158,400 £150,000 £69,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
Executive Directors
Non-Executive Directors
Aslan Frederieke
Slot
Saranga
Peter
Williams
Tom
Singer
Seymur
Tari
İzzet
Talu
Aksel
Sahin
Management report
46 | DP Eurasia N.V. Annual Report and Accounts 2019
Annual remuneration report continued
Total remuneration continued
Notes to the table on page 45 – methodology
Base salary/fees
This represents the cash paid or receivable in respect of the financial year. In local currency, Frederieke Slot’s salary is
€100,000, Peter Williams’ fee as Chairman is £150,000 and Tom Singer’s fee is £69,500 (including additional fees for
his positions as Senior Independent Director, Audit Committee Chairman and Remuneration Committee Chairman).
Executive CEO Aslan Saranga’s salary consists of both salary and €25,000 management fee.
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 value of LTIP awards whose performance period ends in the period under review. No LTIP
awards have been vested to Executive Directors. As a result, this column has a zero figure in the table. Please note that
the amount disclosed for the LTIP awards in note 15 of the financial statements is the expense recognised during the
period in accordance with IFRS.
Local currency totals
Part of Aslan Saranga’s remuneration and the whole of Frederieke Slot’s remuneration are 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.
Additional disclosures in respect of the total remuneration table
Annual bonus
As disclosed in the 2018 Annual Report, our original intention was that Aslan Saranga’s 2019 annual bonus should be
wholly determined by adjusted Group EBITDA performance. As disclosed previously, the General Manager of Russian
Operations resigned during 2019 with Aslan Saranga taking temporary control of Russian operations in addition to his
CEO responsibilities. In light of this change, the Remuneration Committee resolved that the structure of Aslan Saranga’s
2019 annual bonus should be amended to better align with his revised responsibilities and strategic priorities for the
year. This revised structure involved 75% of the bonus (up to 60% of salary) being determined by adjusted Group EBITDA
performance with the remaining 25% of the bonus (up to 20% of salary) based on the successful resolution of critical
issues relating to franchisee management.
Following the performance assessment, Aslan Saranga received a cash bonus of 32.6% of base salary (TRY 748,086)
out of a maximum opportunity of 80% of base salary which the Remuneration Committee felt was a fair reflection of
Group and individual performance during the year. Details of the bonus are set out below.
Performance measure
Threshold
performance
Maximum
performance
Actual
performance
Group adjusted EBITDA (excluding IFRS 16)
TRY 111.7m
TRY 146.6m
TRY 119.3m(1)
% of salary
payable
13.1%
(1) The actual performance figure of TRY 119.3 million differs from the disclosed EBITDA of TRY 124.5 million. This is because the bonus
targets and actual performance figures are shown on a comparable basis and stated after provision for full bonus payouts which
exceeded actual bonus payouts.
Zero
payout
60% of
salary payout
DP Eurasia N.V. Annual Report and Accounts 2019 | 47
Franchisee management
During 2019, the Group’s franchisees in the regions of Russia outside of Greater Moscow raised issues related to the
franchise agreements that they had signed with the Group. The Board decided that given the lack of operational skills
and experience on the part of some franchise partners resulting in poor performance, it was necessary to acquire
the relevant franchised stores. The negotiation process with the franchisees, led by Aslan Saranga, was lengthy and
complex but ultimately the Group was able to successfully acquire the stores and, as a consequence mostly resolved the
outstanding issues pertaining to them. Having assessed the considerable personal contribution of Aslan Saranga to this
successful resolution of Russian franchisee management issues, the Remuneration Committee agreed an award of 19.5%
of base salary to him in respect of this element of the bonus.
Payments to past Directors and payments for loss of office
There were no payments to past Directors nor payments for loss of office to Directors during the year ended
31 December 2019.
Statement of Directors’ shareholdings and share interests
The tables below show the Directors’ share ownership as at 31 December 2019.
For the duration of the Remuneration Policy, the Chief Executive Officer is required to retain a minimum of 5,000,000
shares. He is currently compliant with this requirement. As the Company Secretary does not currently participate in the
ADBP or LTIP, she is not currently subject to a shareholding guideline.
Director
Aslan Saranga
Frederieke Slot
Peter Williams
Tom Singer
Seymur Tarı
İzzet Talu
Aksel Şahin
Shares owned outright
at 31 Dec 2019
(number of shares)
Outstanding share
awards granted under
LTIP at 31 Dec 2019
(number of shares)
8,106,310(1)
612,028
—
81,776
50,000
—
—
—
—
—
—
—
—
—
(1) Aslan Saranga owns shares through his wholly owned entity Vision Lovemark Coöperatief U.A.
Between 31 December 2019 and the date of this report, there were no changes in the shareholdings outlined in the
above table.
Additionally, on 3 May 2019, Aslan Saranga was granted an LTIP award which will vest in May 2022 subject to
achievement of an EBITDA growth target. Full details of the award are set out below.
Aslan Saranga
Conditional
share award
Date
of grant
Maximum
number
of shares
Face
value(1)
(TRY)
Face
value
(% of salary)
Performance
condition
3 May 2019
332,706
2,295,844
100% 0%–100% vests
for cumulative
adjusted EBITDA
in 2019–2021
of TRY 434m
–TRY 482m
End of
performance
period
31 Dec 2021
(1) The maximum number of shares that could be awarded has been calculated using the share price of GBP 0.88 (closing share price
on 6 May 2019) and an exchange rate of GBP 1: TRY 7.8415 (6 May 2019) and excludes any additional shares that may be awarded in
relation to dividends accruing during the vesting period.
Management report
48 | DP Eurasia N.V. Annual Report and Accounts 2019
Annual remuneration report continued
Performance graph and Chief Executive Officer remuneration table
The chart compares the total shareholder return (“TSR”) performance of DP Eurasia during the period since the IPO to the
FTSE All-Share Index. This index has been chosen because it is a recognised equity market index of which DP Eurasia is
a member.
DP Eurasia’s total shareholder return compared to total shareholder return of the FTSE All-Share Index since the IPO on 3 July 2017
£150
£100
£50
£0
Jun 17
DP Eurasia
FTSE All-Share Index
Sep 17
Dec 17
Mar 18
Jun 18
Sep 18
Dec 18
Mar 19
Jun 19
Sep 19
Dec 19
The table below shows the total remuneration payable to the Chief Executive Officer as a percentage of the maximum
opportunity.
Chief Executive Officer total remuneration (TRY)
ADBP payout (% of maximum)
LTIP vesting
Year
ended
31 Dec 2017
2,344,322
67%
Year
ended
31 Dec 2018
2,929,266
49%
Year
ended
31 Dec 2019
3,215,510
41%
n/a (no award
n/a (no award
vested during 2017) vested during 2018) vested during 2019)
n/a (no award
Percentage change in remuneration of the Chief Executive Officer
The table below illustrates the percentage change in annual salary, benefits and bonus between 2018 and 2019 for the
Chief Executive Officer and the average for all other Turkish headquarters employees. This analysis provides a comparison
between employees whose remuneration has been determined subject to a common economic environment. All figures
relate to movement in remuneration expressed in Turkish Lira.
Chief Executive Officer
Average for all Turkish headquarters employees
Notes to the table:
Salary
change
(2017 to
2018)
38%
15%
Salary
change
(2018 to
2019)
15%
22%
Benefits
change
(2017 to
2018)
28%
33%
Benefits
change
(2018 to
2019)
14%
15%
Annual
bonus
change
(2017 to
2018)
0%
12%
Annual
bonus
change
(2018 to
2019)
-4%
-7%
• this table consists of last two years’ data since DP Eurasia only listed in 2017;
• the Chief Executive Officer’s salary was adjusted, post IPO, to the appropriate level for UK-listed Small Cap company
benchmarks;
• as explained in this report, the Chief Executive Officer’s annual bonus is based on Group adjusted EBITDA and successful
resolution of critical issues relating to franchisee management in Russia; and
• all other Turkish employees will benefit from a structured performance management system: bonus earned is
affected by both business performance of the Company (measured by six KPIs) and success rates against individual
targets. Company performance directly impacts the bonus amount to be distributed; above or below target realisation
will increase or decrease the bonus pool accordingly.
Details of the internal pay ratio for 2019 are on page 43.
DP Eurasia N.V. Annual Report and Accounts 2019 | 49
Relative importance of the spend on pay
The table below illustrates the total expenditure on pay for all of the Group’s employees compared to dividends payable
to shareholders in respect of the year ending 31 December 2019. A 2018 comparative figure is also provided.
Total staff costs (further details are provided in Note 5
to the consolidated financial statements (page 105))
Total dividends
Year ended
31 Dec
2019
Year ended
31 Dec
2018
TRY 204.1m
TRY 193.3m
—
—
Consideration by Directors of matters relating to Directors’ remuneration
The Remuneration Committee is responsible for reviewing and making recommendations to the Board regarding
the Remuneration Policy and for reviewing compliance with the Remuneration Policy. During the year ending
31 December 2019, the Remuneration Committee consisted of Tom Singer (Chairman) and Peter Williams. The
Remuneration Committee met on three occasions during the period between 1 January 2019 and 31 December 2019.
Workforce engagement
DP Eurasia’s approach to investing in, and engaging the workforce is explained in the People section of this report
on page 17.
The Remuneration Committee was also updated for Company-wide salary increases and levels of annual bonus for
the general employee population so that they can compare the Executive Directors’ total remuneration with the
wider workforce.
Internal advice
The Chief Executive Officer, the Chief Executive Officer of Russian Operations, the Human Resources Director and
representatives of Fides Food Systems (Seymur Tarı, İzzet Talu and Aksel Şahin) joined Remuneration Committee
meetings to provide valuable input. The Company Secretary acted as secretary to the Remuneration Committee.
No individual was present when their own remuneration was being discussed.
External advice
Following the IPO, Deloitte LLP was appointed by DP Eurasia to provide advice on executive remuneration matters and
it continued to do so during 2018 and 2019. The Remuneration Committee received independent and objective advice
from Deloitte, principally on the preparation of the remuneration report and on the queries raised by the Remuneration
Committee Chairman. Deloitte also joined Remuneration Committee meetings by phone. In addition, Deloitte assisted
DP Eurasia during the year with the UK Corporate Governance Code changes. Deloitte was paid £14,750 in fees during
the period ending 31 December 2019 for these services to the Remuneration Committee (charged on a time plus
expense basis). Deloitte is a founding member of the Remuneration Consultants Group and, as such, voluntarily operates
under the code of conduct in relation to executive remuneration consulting in the UK. The Remuneration Committee is
satisfied that the Deloitte engagement partner and advisory team that provide remuneration advice to the Committee,
do not have any connections with DP Eurasia or individual Directors that may impair their independence.
External Board appointments
Executive Directors are normally entitled to accept external appointments outside DP Eurasia with the consent of the
Non-Executive Directors. Any fees received may be retained by the Executive Director. As at the date of this report,
none of the Executive Directors held an external appointment for which they received a fee.
Shareholder voting on remuneration report resolutions
Approval of the Annual Report on Remuneration
Votes for
Votes against
Votes withheld
2019 AGM
118,525,669 (99.6%)
489,341 (0.4%)
0
Approval of the Directors’ Remuneration Policy
2018 AGM
On behalf of the Board
Tom Singer
Chairman of Remuneration Committee
26 March 2020
120,581,673 (97.6%)
2,926,837 (2.4%)
1,130,312
Management report
50 | DP Eurasia N.V. Annual Report and Accounts 2019
The Board aims to represent all stakeholders and to
provide leadership and control in order to ensure the
growth and development of a successful business.
Audit Committee
Remuneration Committee
Selection and Appointment
Committee
Chairman and Independent Non‑Executive DirectorYear of birth: 1953Nationality: BritishInitial appointment: July 2017Mr Williams has spent over 30 years in both executive and non-executive positions in consumer-facing businesses comprising retail, leisure, media and consumer products. Mr Williams also serves as Chairman of the following companies: Mister Spex (an online eyewear retailer based in Berlin), U and I Group plc (a property regeneration company) and Superdry plc (a fashion retailer). In 2019, Mr Williams stepped down as senior independent director at Rightmove plc (a UK property portal) and as Chairman of boohoo.com plc (an online fashion retailer). For eight years to December 2013, he was the senior independent director at ASOS plc (an online fashion retailer). Previous to this, for 13 years up to 2004, Mr Williams served as chief financial officer and then as chief executive of Selfridges. Amongst others, Mr Williams has served on the boards of Cineworld Group plc, Blacks Leisure Group plc and JJB Sports plc. He is also a chartered accountant and has a bachelors degree in Mathematics from Bristol University.Non‑Executive DirectorYear of birth: 1980Nationality: TurkishInitial appointment: June 2017Ms Şahin was appointed a Non-Executive Director in June 2017. She served as a Non-Executive Director of the Russian subsidiaries of the Group between 2012 and June 2017. She is currently a principal (which is the equivalent of an investment director) at Turkven. She was formerly with Koç Holding in Istanbul focusing on mergers and acquisitions and portfolio strategy in the energy sector. Ms Sahin serves on the board of Elif Plastik. Ms Şahin has an MBA from Harvard Business School and a degree in Economics from Koç University.Chief Executive Officer and Executive DirectorYear of birth: 1969Nationality: TurkishInitial appointment: June 2017Mr Saranga is the Chief Executive Officer, having been appointed as the founding chief executive officer of the exclusive master franchisee of the Domino’s System in Turkey on its inception in 1996. He also serves as the Chief Executive Officer of the Turkish Operations as well as the Chairman of the Domino’s Russia Board of Directors. He currently sits as a board member of the Food Retailers Association, a leading industry group in Turkey, and is a member of Domino’s Pizza General Management Council, which is comprised of the CEOs of the top ten countries in the global Domino’s Pizza network. Mr Saranga has a masters degree in Finance from the University of Istanbul.Board Peter WilliamsAksel ŞahinAslan Saranga DP Eurasia N.V. Annual Report and Accounts 2019 | 51
Management reportNon-Executive DirectorYear of birth: 1975Nationality: TurkishInitial appointment: June 2017Mr Talu was appointed a Non-Executive Director in June 2017. He served as a Non-Executive Director of the Turkish subsidiaries of the Group between 2010 and June 2017 and of the Russian subsidiaries of the Group between 2012 and May 2017. Mr Talu serves as a principal (which is the equivalent of an investment director) at Turkven. Prior to joining Turkven in 2008, he worked at UBS and Creditanstalt Investment Bank, where he was involved in numerous mergers and acquisitions and equity capital market transactions. Mr Talu holds an MBA from RSM Erasmus University and a bachelors degree in Business Administration from Koç University.Company Secretary and Executive DirectorYear of birth: 1982Nationality: DutchInitial appointment: July 2017Ms Slot served as senior legal counsel of USG People between 2014 and 2017 (a large HR service provider that was listed on the Amsterdam Stock Exchange until June 2016). She spent the early part of her career as an attorney-at-law with various large Dutch law firms advising on restructuring, mergers and acquisitions and advising national and international companies on a wide range of strategic legal issues, corporate governance matters and legal and regulatory responsibilities. Ms Slot has a degree in Law from the University of Leiden.Senior Independent Non-Executive DirectorYear of birth: 1963Nationality: BritishInitial appointment: July 2017Mr Singer also serves as a non-executive director of Mediclinic International plc (an international private healthcare services group). Mr Singer served as the chief financial officer of onefinestay (a registered trademark of Lifealike Limited) between 2015 and 2016 (a home rentals business), as well as InterContinental Hotels Group PLC between 2011 and 2013. Mr Singer has also been a group finance director at the international healthcare group BUPA, and chief operating officer and finance director of William Hill plc. He is a chartered accountant and spent the early part of his career in professional services with PricewaterhouseCoopers and McKinsey & Company working for international clients in the financial services, media and transportation sectors. Mr Singer has a degree in Economics & Accounting from the University of Bristol.Non-Executive DirectorYear of birth: 1969Nationality: TurkishInitial appointment: June 2017Mr Tarı was appointed a Non-Executive Director in June 2017. He served as the Chairman of the Turkish subsidiaries of the Group between 2010 and June 2017. He has served as the chief executive officer of Turkven since 2000. Mr Tarı was formerly with McKinsey & Company in Istanbul focusing on corporate portfolio strategy and at Caterpillar Inc. in Geneva as a product manager with responsibility for the EMEA and CIS regions. Mr Tari also serves as the Vice-Chair on the boards of Mavi, Elif Plastik, Medical Park, Flo and Koton. He has an MBA from INSEAD and a masters degree in Mechanical Engineering and Robotics from ETH Zurich.Frederieke SlotThomas SingerSeymur Tarıİzzet Talu 52 | DP Eurasia N.V. Annual Report and Accounts 2019
Leadership team
Chief Executive Officer and
Head of Leadership
See biography on page 50.
Aslan
Saranga
Neval
Korucu
Alpagut
Mustafa
Özgül
Chief Financial Officer
Ms Alpagut became Chief Financial
Officer in 2017. Since 2006 she has been,
and continues to be, the Chief Financial
Officer of the Turkish Operations. Prior
to joining the Group in 2006, Ms Alpagut
worked for ten years at Volkswagen
Elektrik Sistemleri as a finance and
accounting manager. Ms Alpagut has a
degree in Business Administration from
İstanbul University (Turkey).
Chief Executive Officer
of Russian Operations
Mr Özgül was appointed as the Chief
Executive Officer of Russian Operations
in 2020. He served as the Chief Financial
Officer of Russian Operations between
2014 and 2020. Prior to joining the Group,
Mr Özgül worked for two years at Ramstore
Kazakhstan LLC as its chief financial
officer and for three years at Bechtel Inc.
in Kazakhstan as its accounting and finance
manager and seven years at Bechtel Inc.
overall. Mr Özgül obtained a degree in
Management from Istanbul Technical
University (Turkey).
Selim
Kender
Kerem
Ciritci
Chief Strategy Officer and
Head of Investor Relations
Mr Kender joined the Group in 2017.
Prior to this he acted as an adviser to the
Group’s Board of Directors in both Turkey
and Russia. He also spent ten years at
Turkven and spent five years at both NTL
Inc. and CoreComm Limited concurrently,
in corporate development and investor
relation roles. Mr Kender has an MBA
from Columbia Business School and a
degree in Mechanical Engineering from
the University of Texas.
Chief Growth Officer
Mr Ciritci became Chief Growth Officer
in 2018. Since 2010 he has been Business
Development, Franchise Operations and
International Development Director of
the Turkish Operations. Prior to joining
the Group in 2006, Mr Ciritci worked
for Ritz Carlton and Alarko Tourism
Group. Mr Ciritci has a degree in Tourism
Administration from Boğaziçi University
(Turkey).
DP Eurasia N.V. Annual Report and Accounts 2019 | 53
Board attendance and composition
Date of
possible
reappointment
Duration
of unexpired term
of appointment
Attendance
at planned
Board
meetings
Attendance
site visits
2020
2020
2020
2020
2020
2020
2020
2 months
2 months
2 months
2 months
2 months
2 months
2 months
5/5
5/5
5/5
5/5
5/5
5/5
5/5
3/3
3/3
3/3
3/3
3/3
3/3
3/3
Peter Williams
Aslan Saranga
Frederieke Slot
Seymur Tari
Izzet Talu
Aksel Şahin
Thomas Singer
Attendance at
meetings of
the Audit and
Remuneration
Committees
Attendance at
meetings of the
Selection and
Appointment
Committee
10/10
2/2
2/2
2/2
10/10
International experience
Board diversity
Board
Executive Directors
Non-Executive
Directors
Senior management
71%
29%
50%
50%
80%
20%
50%
50%
WOMEN
WOMEN
WOMEN
WOMEN
MEN
MEN
MEN
MEN
Directors’ skills and experience
Skills/experience
Retail
Remuneration/people
Finance
Marketing/brand
Product specific
Listed entity experience
Legal, governance and compliance
IT/digital
International markets
Number of Directors
6/7
2/7
6/7
3/7
4/7
3/7
1/7
2/7
5/7
Management report 54 | DP Eurasia N.V. Annual Report and Accounts 2019
Corporate governance report
The Board is committed to maintaining a governance
framework that is appropriate to the business, supports
effective decision making and promotes decisions
focused on the long-term success of the Group.
Corporate governance
DP Eurasia is a limited liability
company incorporated under
the laws of the Netherlands.
DP Eurasia has a premium listing
of ordinary shares on the London
Stock Exchange. The Company
has a one-tier Board structure.
The following sections explain how
the Company applies the main
provisions set out in the UK Corporate
Governance Code and the Dutch
Corporate Governance Code and
have been prepared in line with the
UK Listing Authority Listing Rules
(the “Listing Rules”).
This part of the
Annual Report covers:
• the structure and role of the
Board and its committees;
• relations with the Company’s
shareholders and the General
Meeting;
• the reports of the Audit
Committee, the Remuneration
Committee and the Selection
and Appointment Committee;
and
• information that needs to
be included pursuant to the
Listing Rules, if not included
in the consolidated financial
statements, the remuneration
report (payment for loss of
office) and the shares and
shareholders paragraph
(Relationship Agreement and
the controlling shareholder).
Appointment, dismissal
and suspension
Pursuant to the Company’s articles
of association, the Board must consist
of at least one Executive Director
and one Non-Executive Director.
The Board determines the total
number of Directors. The General
Meeting appoints, suspends and
dismisses each Director. For so long
as there is a controlling shareholder
(for the purposes of the Listing
Rules), the Board rules allow for
the election or re-election of any
independent Director to be approved
by separate resolutions of: (i) the
Company’s shareholders; and (ii) the
Company’s shareholders excluding
any controlling shareholder. If either
of the resolutions is defeated, the
Company may propose a further
resolution to elect or re-elect the
proposed independent Director,
which (a) may be voted on within
a period commencing 90 days and
ending 120 days from the original
vote, and (b) may be passed by a vote
of the shareholders of the Company
voting as a single class.
Each Executive Director may at any
time be suspended by the Board.
The General Meeting determines
the term of appointment for each
Director, which may not end sooner
than immediately after the AGM held
in the first year after the year of the
Director’s appointment and not later
than immediately after the AGM held
in the fourth year after the year of the
Director’s appointment. The Board
Rules provide that Directors will
be appointed for no more than
three years.
The Board
This section of the corporate
governance report explains how
the Board has fulfilled its duties and
obligations during the year 2019.
Role and responsibilities
The Board is a one-tier board and
the Directors have joint powers
and responsibilities. The Directors
share responsibility for all decisions,
resolutions and acts of the Board
and for the acts of each Director.
Each Director has a duty towards
the Company to properly perform
the duties assigned to him or her.
Furthermore, each Director has
a duty to act in the interests of
the Company and its business.
Under Dutch law, the corporate
interest extends to the interests of
all corporate stakeholders, such as
shareholders, creditors, employees
and other stakeholders.
At any time, the Board, as a whole,
is entitled to represent and act on
behalf of the Company. Additionally,
the Chief Executive Officer and
another Executive Director acting
jointly are authorised to represent
and act on behalf of the Company.
The majority of the Directors are
Non-Executive Directors who
essentially have a supervisory role.
The names and biographical details
of the serving Directors, their role on
the Board, their dates of appointment
and their other major appointments
can be found on pages 50 to 51.
The Board is responsible for the
management, general affairs,
strategy and operations of the
Company. The Board may perform all
acts necessary or useful for achieving
the Company’s corporate objectives,
except for actions and resolutions
expressly attributed to the General
Meeting as a matter of Dutch law or
pursuant to the Company’s articles of
association.
DP Eurasia N.V. Annual Report and Accounts 2019 | 55
Board committees and roles
Shareholders
171 shareholders as at 31 December 2019
Board
Selection and
Appointment Committee
Audit
Committee
Remuneration
Committee
The Selection and
Appointment Committee
assists and advises the Board
and prepares the Board’s
decision-making. The Selection
and Appointment Committee,
among other things, focuses
on: (a) drawing up selection
criteria and appointment
procedures for Directors;
(b) periodically assessing
the size and composition
of the Board, and making a
proposal for a composition
profile of the Board; (c)
periodically assessing the
functioning of individual
Directors, and reporting on
this to the Board; (d) drawing
up a plan for the succession
of Directors; (e) making
proposals for appointments
and re-appointments; and (f)
supervising the policy of the
Board regarding the selection
criteria and appointment
procedures for senior
management.
See Selection and
Appointment Committee
report on pages 58 and 59.
The Remuneration Committee
assists and advises the Board
and prepares the Board’s
decision-making regarding the
determination of remuneration
of the Executive Directors,
the proposed target for
the LTIP and the review
and monitoring of overall
remuneration packages for
senior management. The
Remuneration Committee
submits proposals to the Board
concerning the remuneration
of individual Directors
and variable remuneration
schemes for other employees.
Such proposals are drawn
up in accordance with the
Remuneration Policy that
has been adopted by the
General Meeting and covers,
in any event, the remuneration
structure, the ratio between
the fixed and variable
components, the performance
criteria used, the scenario
analyses that are carried out
and the pay ratios within the
Company and its affiliated
enterprise.
See Remuneration Committee
report on page 58.
The Audit Committee assists
and advises the Board and
prepares the decision-making
of the Board on the
supervision of the integrity
and quality of the Company’s
audit, accounting and
financial reporting processes
and the effectiveness of
the Company’s internal risk
management and control
systems. Among other things,
it focuses on monitoring the
Board with regard to: (a)
relations with, and compliance
with recommendations and
following up of comments
by, the internal and external
auditors; (b) the funding of
the Company; and (c) the
application of information and
communication technology by
the Company, including risks
relating to cybersecurity.
See Audit Committee report
on pages 57 and 58.
Executive team
Chief Executive Officer
Chief
Financial
Officer
Chief Strategy
Officer and
Head of IR
Chief Growth
Officer
CEO
Russia
COO
Russia
CFO
Russia
Company
Secretary
Management report 56 | DP Eurasia N.V. Annual Report and Accounts 2019
Corporate governance report continued
The Board continued
Appointment, dismissal
and suspension continued
A Director’s appointment may be
renewed by the General Meetings,
with due observance to the rules
and regulations as applicable to
the Company. A resolution of the
General Meeting to appoint, suspend
or dismiss a Director requires an
absolute majority of the votes cast.
The General Meeting can suspend
or dismiss a Director at any time.
Board resolutions to suspend or
dismiss an Executive Director require
an absolute majority of the votes cast.
Fides Food Systems will be able to
nominate for appointment up to three
Non-Executive Directors to the Board,
for so long as it and its associates are
entitled to exercise or to control the
exercise of 10% or more of the votes
able to be cast on all or substantially
all General Meetings. More
information relating to the nomination
rights of Fides Food Systems can be
found on pages 61 and 77.
Executive Directors
Non-Executive Directors
The Board has delegated the
operational running of the Group
to the Executive Directors with the
exception of the following matters
which are reserved for the full Board:
structural and constitutional matters;
corporate governance matters;
dividend proposals; developing and
approval of the overall strategy and
decisions on managing the corporate
portfolio; approval of the business
plan and budget; oversight of the
operational and financial performance
of the business; review and approval
of any publication by the Company
of any information required by
applicable laws and regulations;
approval of significant transactions or
arrangements in relation to mergers,
acquisitions, joint ventures and
disposals; approval of changes made
to franchise agreements or other
significant agreements; settlement of
material litigation issues, significant
financial injections and capital
expenditures; and approval of
material changes to pension liabilities.
The Non-Executive Directors share
full responsibility for the execution of
the Board’s duties. Within this broad
responsibility, the Non-Executive
Directors are essentially supervising
and advising the Board and
management regarding the strategy,
the implementation of the strategy
and the principal risks associated
with it and focus on the effectiveness
of the Company’s internal risk
management and control systems
and the integrity and quality of the
financial reporting.
Further, the Non-Executive Directors
scrutinise the performance of
management in meeting the agreed
goals and objectives and supervise
the relations with shareholders.
The Board acknowledges that it is
important that the Non-Executive
Directors develop an understanding
of the views of major shareholders
about the Company. In relation
herewith, the Non-Executive
Directors are regularly provided
with analysts’ updates and briefings
and are invited to join meetings
with major shareholders. In carrying
out their duties, the Non-Executive
Directors are guided by the Dutch
Civil Code, the Dutch Corporate
Governance Code, the UK Corporate
Governance Code, the Company’s
articles of association, and the overall
interests of the Group, its business
and stakeholders.
Board activities
A Strategy (financial and
10%
H Compliance
P
A
O
N
M
L
B
C
D
E
K
J
F
G
I
H
operational)
B Remuneration Policy and
approach
C Investments, shareholder
returns, and dividends
D Performance conditions
and employee share scheme
awards, including executive
management oversight and
performance
E Risk management
and mitigation
F Budgeting
G Investor relations
8%
4%
7%
5%
6%
4%
5%
7%
5%
5%
I Key policies and governance
arrangements
J Board composition
K Auditor reports,
appointments and fees
L Going concern and viability
5%
statement
M Board evaluation
N Annual Report
O Trading updates and
financial performance
P Innovation
8%
7%
10%
4%
DP Eurasia N.V. Annual Report and Accounts 2019 | 57
Each Non-Executive Director has
committed to the Company that
they are able to allocate sufficient
time to the Company to discharge
their responsibilities effectively.
At the 2020 AGM, it is proposed
that the current Executive and
Non-Executive Directors will be
reappointed. The Board has taken
into account the other demands of
the relevant Directors and has no
concerns on their time commitment
using the prior year as a reference
point. Since the same Chairman
and Director will be reappointed, an
external search agency has not been
used. Any additional appointments
they are contemplating taking on
are discussed with the Chairman in
advance, including the likely time
commitment and whether these
could in any way constitute a conflict
of interest.
Committees
The Company has established three
committees: an Audit Committee,
a Remuneration Committee and
a Selection and Appointment
Committee. These committees
each have written terms of reference,
and are currently composed as
described below. The members of
each of these three committees
are appointed from among the
Non-Executive Directors. From time
to time, separate committees may be
established by the Board to consider
specific issues when the need arises.
The Committees operate pursuant to
the terms of reference approved by
the Board in accordance with the law,
the Dutch Code and the UK Code.
The terms of reference were revised
in January 2019 and further reviewed
by each committee during the year.
The committees’ terms of reference
are available on the Company’s
corporate governance website,
including attendance at meetings in
2019, which can be found on page 53.
The Audit Committee’s focus in
2019 was, among other things,
on overseeing the integrity and
quality of the Group’s financial
reporting, the effectiveness of the
internal risk and control systems,
the relevant 2019 tax matters and
the implementation of the new IFRS
standard 16. The Audit Committee
reviewed the Company’s annual and
interim financial statements and
related press releases, as well as the
outcomes of the year-end audit.
The Audit Committee discussed
relevant accounting principles and
reviewed new accounting standards
for lease accounting under IFRS 16
and the recoverability of deferred tax
assets (“DTA”) from carry forward tax
losses of DP Russia.
Furthermore, the Audit Committee
reviewed and approved the audit
plans of the internal and external
auditors, with a focus on scoping,
materiality and key risks. The Audit
Committee monitored the progress
of the internal and external audit
activities, including a review of
observations identified as a result
of the internal audit activities during
the quarter, quarterly procedures
performed by the external auditor
and the audit performed at year
end by the external auditor.
The Audit Committee oversaw
follow-up by management on the
recommendations made by the
internal and external audit reports.
The Audit Committee extensively
discussed the effectiveness of
the internal control framework.
Each quarter, the agenda
includes a discussion on current
control topics, including internal
audit findings and the external
auditor’s reflections on the control
framework. These discussions
guided management and internal
audit to focus on the right priorities
throughout the year and to build a
relevant internal audit plan for 2020.
Audit Committee
The Audit Committee met seven
times in 2019. In general, all meetings
of the Audit Committee are attended
by the CEO, the CFO, the Internal
Audit and Risk Management Director
and the external auditor. The
Company Secretary attends meetings
in her capacity as Secretary of the
Audit Committee. At the end of each
meeting, it was chosen to discuss
matters without the management
being present and there is regular
dialogue with the audit partner.
The Chief Strategy Officer and
Head of Investor Relations joined
the meetings during which the
press releases regarding annual
and half-year results were discussed.
Other members of the Board and
senior management were invited when
necessary or appropriate. The Audit
Committee is chaired by Mr Singer
and its other member is Mr Williams.
The UK Corporate Governance
Code recommends that the Audit
Committee has a minimum of two
members, taking into account that
the Company is seen as a smaller
company and that all members of the
Audit Committee be Non-Executive
Directors, independent in character
and judgement and free from any
relationship or circumstance which
may, could or would be likely to,
or appear to, affect their judgement.
The Dutch Corporate Governance
Code requires that all members of the
Audit Committee be Non-Executive
Directors and that more than
half of the members should be
independent. The Board considers
that the Company complies with the
independence requirements of the
UK Corporate Governance Code and
the Dutch Corporate Governance
Code as to the composition of
the Audit Committee, because
the Audit Committee comprises
two independent Non-Executive
Directors. The UK Corporate
Governance Code also recommends
that the Chairman of the Board
should not be a member of the Audit
Committee. The Company will not
comply with this principle. More
information on the accountability
regarding this Best Practice Provision
of the UK Corporate Governance
Code can be found on page 61.
Management report 58 | DP Eurasia N.V. Annual Report and Accounts 2019
Corporate governance report continued
Audit Committee continued
The Audit Committee has provided
advice to the Board on whether
the Annual Report and Accounts,
taken as a whole, is fair, balanced
and understandable and provides
the information necessary for
shareholders to assess the Group’s
financial position and performance,
business model and strategy.
Each Director was also asked to
provide this confirmation. When doing
so, both the Audit Committee and the
individual Directors were provided
by management with a formal
assessment of the key messages
included in the Annual Report and
Accounts. This assessment was
designed to test the quality of
reporting and to enable the Directors
to satisfy themselves that the levels of
disclosure were appropriate.
The Audit Committee has reviewed
the independence, effectiveness and
objectivity of the external auditor,
PwC, and considers that PwC
possesses the skill and experience
required to fulfil its duties effectively
and efficiently. The Audit Committee’s
review of the effectiveness of PwC as
the external auditor is based on the
interaction of the Audit Committee
with PwC, discussions with the
senior finance team, discussions
with the lead audit partner and his
team, robustness of the audit and
the quality of reporting to the Audit
Committee.
PwC has monitored its compliance
with external standards, the PwC
Global Independence Policy and
DP Eurasia’s independence policy
with respect to services provided
in 2019 and confirmed that it has
been and is compliant with these
independence requirements.
With respect to the external auditor’s
Board report about the 2019 financial
year, the Audit Committee confirms
that the Board report contained no
significant items that need to be
mentioned in this report.
DP Eurasia N.V. was incorporated on
18 October 2016 and listed its shares
on the London Stock Exchange as of
3 July 2017.
As a consequence,
PricewaterhouseCoopers
Accountants N.V. was appointed as
the statutory auditor of the listed
entity. Prior to the listing, PwC Turkey
was already the statutory auditor of
the consolidated financial information
of all the operating entities since
31 December 2014. The shareholders
reappointed PwC during the AGM on
29 May 2019.
The Audit Committee agrees the
fees for the external auditor and
has agreed strict rules regarding
the provision of non-audit services
by the external auditor. These include
specific pre-approvals for proposed
non-audit work.
Remuneration Committee
The Remuneration Committee is
chaired by Mr Singer and its other
member is Mr Williams. Members
of the Remuneration Committee
are appointed by the Board. The
UK Corporate Governance Code
recommends that all members of
the Remuneration Committee be
Non-Executive Directors, independent
in character and judgement and free
from any relationship or circumstance
which may, could or would be
likely to, or appear to, affect their
judgement. The Dutch Corporate
Governance Code requires that
all members of the Remuneration
Committee be Non-Executive
Directors and that more than half of
the members be independent. The
Board considers that the Company
complies with the requirements of
the UK Corporate Governance Code
and the Dutch Corporate Governance
Code as to the composition of the
Remuneration Committee because
the Remuneration Committee
comprises two independent
Non-Executive Directors. In 2019,
the Remuneration Committee met
three times. The meetings of the
Remuneration Committee were
attended by the CEO and the Human
Resources Director (by phone and
in person) whenever necessary.
The Company Secretary attends
meetings in her capacity as Secretary
of the Remuneration Committee.
Other members of the Board and
senior management were invited
when necessary or appropriate.
In the case of topics concerning the
remuneration of the Chief Executive
Officer, it was chosen to discuss
these matters without the Chief
Executive Officer being present.
Further detail on remuneration of
the Board can be found on pages
44 to 49 in the remuneration report,
which includes a further explanation
of the Remuneration Policy and
the actual remuneration and
relationship between remuneration
and performance of the Executive
Directors for 2019.
Selection and
Appointment Committee
The Selection and Appointment
Committee is chaired by Mr Williams
and its other members are Messrs
Singer and Talu. Members of
the Selection and Appointment
Committee are appointed by the
Board. The UK Corporate Governance
Code recommends that a majority
of the Selection and Appointment
Committee be Non-Executive
Directors, independent in character
and judgement and free from any
relationship or circumstance which
may, could or would be likely to, or
appear to, affect their judgement,
and the Dutch Corporate Governance
Code requires that all members
of the Selection and Appointment
Committee be Non-Executive
Directors and that more than half
of the members be independent.
The Board considers that the
Company complies with the
requirements of the UK Corporate
Governance Code and the
requirements of the Dutch
Corporate Governance Code as to
the composition of the Selection
and Appointment Committee
because the Selection and
Appointment Committee comprises
two independent Non-Executive
Directors and one non-independent
Non-Executive Director.
The Selection and Appointment
Committee met two times
in 2019. The meetings of the
Selection and Appointment
Committee were attended by the
Chief Executive Officer and the
Company Secretary in her capacity
as Secretary of the Selection and
Appointment Committee.
The Selection and Appointment
Committee discussed the possible
succession planning of Executive
Directors, Non-Executive Directors
and the executives in Turkey
and Russia. The Selection and
Appointment Committee also
discussed the Board’s approach
to its annual self-assessment on
Board effectiveness and reviewed
the performance of the Directors
seeking re-election at the 2020 AGM.
The Board recognises its
responsibility of having Directors
with the appropriate balance of
educational background, experience,
independence and knowledge of
the Company to enable them to
discharge their respective duties and
responsibilities effectively. The Board
has a key role to protect shareholders’
interests by ensuring that the Board
and management are challenged,
constructively and effectively, and it
is important that they do so from a
range of perspectives. Fortunately,
our business is diverse and people
are recruited regardless of their
gender, nationality or possible other
characteristics to make sure that
people are recruited from the widest
pool of talent.
Details of the Group-wide diversity
data are shown on page 53.
DP Eurasia N.V. Annual Report and Accounts 2019 | 59
Board effectiveness
Activities of the Board
A minimum of four face-to-face
meetings are planned throughout
the calendar year to consider, for
example, the half-year and full-year
results announcements of the Group
and the strategy of the Group.
Meetings of the Board are held in
Amsterdam, with two to three site
visits to Moscow and Istanbul a
year. The Chairman sets the Board’s
agenda, ensures the Directors receive
accurate, timely and clear information,
and promotes effective relationships
and open communication between
the Executive and Non-Executive
Directors.
These physical meetings were
held in Amsterdam with all the
Directors being present. Throughout
the year, the Chairman and other
Non-Executive Directors had regular
contact with the Chief Executive
Officer. None of the Non-Executive
Directors were frequently absent.
The table showing the attendance of
Directors at Board meetings in 2019
can be found on page 53.
At each Board meeting and with
respect to any proposed resolution
submitted to the Board, each Director
holds the right to cast one vote
provided that such Director does not
have a conflict of interest with respect
to the proposed resolution. Where
the articles of association or the
Board Rules do not prescribe a larger
majority, all resolutions submitted to a
Board meeting may only be adopted
by a majority of the votes cast in such
a meeting. In the event of a tie, the
proposed resolution will be deemed
to have been rejected.
The meetings addressed routine
commercial, operational and financial
matters and focused on key resource
levels and strategic implementation.
As well as day-to-day matters,
the Non-Executive Directors paid
particular attention to the activities
regarding investors.
Main matters discussed during the
year’s Board meetings:
• developing and approval of the
overall strategy;
• progress on implementing the
overall strategy;
• long-term value creation and the
strategy for realisation;
• budget for 2020;
• oversight of the operational
and financial performance of
the business;
• review of risks and internal risk
management and control systems;
• potential acquisition opportunities;
• investor relations activities;
• capital structure;
• significant human
resources matters;
• major capital investments;
• the half-year results,
including the announcement and
investor presentations of these
half-year results; and
• innovation.
Board evaluation
The Board is required to assess
its own effectiveness. This is a
healthy process for the Board as
a whole, the committees, and the
individual Directors. The evaluation
operates on a three-year cycle,
with two subsequent years of
internal evaluations followed by one
externally led evaluation. The Board
decided that, since it had only been in
function in full as of the IPO, it would
assess its own functioning in 2018
for the first time. The 2019 internal
valuation was performed by means of
a questionnaire. The main conclusions
of the evaluation were collectively
discussed by the Board at its meeting
in December.
The evaluation concluded that the
Board felt its work and performance
during the year had been positive;
the Board is involved in major
developments in the business in the
right level of detail and at the right
time, the Non-Executive Directors
take an independent view of
management and the time and the
commitment of the Non-Executive
Directors to fulfil their responsibilities
are appreciated.
Management report 60 | DP Eurasia N.V. Annual Report and Accounts 2019
Corporate governance report continued
Composition of the Board
The composition of the Board,
including the Non-Executive
Directors, can be found on pages
50 and 51.
The Board has a diverse composition
in terms of educational background,
professional expertise, age and
nationality. In this respect,
DP Eurasia’s ambition is to have
a blend of industry knowledge
and financial, legal, executive
and non-executive expertise.
The target for a balanced Board
composition is a minimum of 30%
female representatives. This target
is currently met by DP Eurasia for
the Executive Directors (50%), but
not for the Non-Executive Directors
(20%). DP Eurasia, however,
regards the full Board as being
well balanced (29%). The Selection
and Appointment Committee will
strive for a diverse composition
in the process of appointing and
reappointing members to the
Board in the future. At the same
time, necessary knowledge of the
Company, franchise, digital retail
and the Company’s key market areas
will stay as key appointment criteria.
There have not been any changes
to the Board during the past three
years. However, in case a position
becomes available, the Selection and
Appointment Committee may use an
external search agency to look for a
suitable Director.
The Board endeavours to ensure
that the composition of the Board is
such that its members are able to act
critically and independently of one
another, the Executive Board and
any particular interest.
The Board has determined that
Messrs Williams and Singer are
independent Non-Executive
Directors within the meaning of
the UK Corporate Governance Code
and best practice provisions 2.1.8
and 2.1.9 (for Mr Williams only) of the
Dutch Corporate Governance Code.
Messrs Tari and Talu and Ms Sahin are
appointed as Non-Executive Directors
upon the nomination of Fides
Food Systems, and are considered
non-independent within the meaning
of best practice provision 2.1.8 of the
Dutch Corporate Governance Code.
Director induction
All the new Directors participated
in an induction programme when
they joined the Board. The Chairman
ensures that ongoing training is
provided for Directors by way of
site visits and presentations.
Indemnification
The terms of the indemnification
granted to the Directors are set
out in the Company’s articles of
association. An excess Directors’
and Officers’ Liability and Corporate
Reimbursement Insurance was in
place for all Directors in 2019 and is
currently in force.
Board effectiveness continued
Board evaluation continued
Key points of attention resulting from
the evaluation in 2019 included more
specific and rigourous succession
plans for senior roles, discussions
on the profile, experience and
composition of the Board, improving
the effectiveness of discussions in
the boardroom and the involvement
of the Board in establishing the
Company’s appetite for risk in respect
of its strategic aims.
Reflecting on the lessons learnt, the
Board agreed, in particular, in the
evaluation discussions:
• the Board agreed to pick one of
the Board meeting dates that will
be reserved for discussion on
strategy; and to closely monitor the
succession planning for key Board
members and senior management
to ensure that it is closely aligned
to the Group’s requirements
and strategy.
The Board attaches great value
to these evaluations. They ensure
continuous focus on the quality
of the activities, composition and
functioning of the Board and
its committees.
The internal control procedures are
described in more detail on pages 64
and 65 of this report. The Board is of
the opinion that these fulfil the needs
of the Group.
Non-Executive Director meetings
The Non-Executive Directors meet
as a group, without the Executive
Directors present, to consider specific
agenda items set by them at least
once a year, including to review
the performance of the Chairman,
its committees and the Executive
Directors. The Chairman, or in his
absence the Senior Independent
Director, chairs such meetings.
DP Eurasia N.V. Annual Report and Accounts 2019 | 61
Conflicts of interest
Any conflict of interest by a member
of the Board shall immediately be
reported to the Board. In the event
that a Director is uncertain whether
or not he has a conflict of interest,
he may request the Chairman to
have the Non-Executive Directors
determine whether there is a conflict
of interest. A Director may not
participate in the deliberation and
decision-making process if he or she
has a conflict of interest. In 2019, no
transactions were reported under
which a Director had a conflict
of interest which was of material
significance to the Company or to
the individual Director.
Insider dealing code
The Board has adopted a code of
securities dealings in relation to the
shares and a policy with respect
to the entry into of transactions
with persons related to the Group.
The code is based on the rules of
the EU Market Abuse Regulation and
will apply to the Directors and other
relevant employees of the Group.
The policy is based on the mandatory
provisions of the Listing Rules which
apply to the Group.
Accountability: UK and Dutch
Corporate Governance Codes
UK Corporate Governance Code
The Company complies with and,
except in the case of any future
deviation, subject to explanation
thereof at the relevant time, intends
to continue to comply with the
relevant recommendations of the
UK Corporate Governance Code.
The UK Corporate Governance Code
contains 18 main principles, which are
expanded on in supporting principles
and detailed provisions. Together,
these set out the key components
of effective Board practice and
corporate governance, and we explain
in this report how we have applied
these during the year.
Fides Food Systems is the largest
holder of shares in the Company and
a subsidiary of Turkish Private Equity
Fund II L.P. (“TPEF II”), the ultimate
parent company. The Company will
continue to represent a significant
investment for Fides Food Systems.
The Board and Fides Food Systems
are mindful of the need to consider
the interests of the Company’s
minority investors and the Group
believes the composition of
the Board and the committees,
with the independent Chairman
(being Mr Peter Williams) and the
independent Non-Executive Director
(being Mr Thomas Singer), will
provide the appropriate corporate
governance balance and the interests
of both Fides Food Systems and
minority shareholders.
Pursuant to the Relationship
Agreement (see page 78), Fides Food
Systems will be able to nominate
three Non-Executive Directors to
the Board for so long as it and its
associates are entitled to exercise
or to control the exercise of 30% or
more of the votes able to be cast
on all, or substantially all, matters at
General Meetings; two Non-Executive
Directors for so long as it and its
associates are entitled to exercise or
control the exercise of 20% or more;
and one Non-Executive Director for
so long as it and its associates are
entitled to exercise or control the
exercise of 10% or more. The first
such appointees were Mr Seymur
Tarı, Mr İzzet Talu and Ms Aksel
Şahin. The UK Corporate Governance
Code recommends that the board
of directors of a company with a
premium listing on the Official List
of the FCA should appoint one of
the non-executive directors to be
the senior independent director
to provide a sounding board for
the chairman and to serve as an
intermediary for the other directors
when necessary. The senior
independent director should be
available to shareholders if they
have concerns which contact through
the normal channels of chairman
or executive directors has failed to
resolve or for which such contact
is inappropriate. Mr Thomas Singer
has been appointed as Senior
Independent Director.
Management report 62 | DP Eurasia N.V. Annual Report and Accounts 2019
Corporate governance report continued
Therefore, except: (i) where the
Dutch Corporate Governance Code
cannot be reconciled to the UK
Corporate Governance Code; (ii)
as noted below; or (iii) in the case
of any future deviation, subject to
explanation thereof at the relevant
time, the Company intends to comply
with the relevant best practice
provisions of the Dutch Corporate
Governance Code (publicly available
at www.mccg.nl).
The Company will not comply with
the following principles and best
practice provisions of the Dutch
Corporate Governance Code:
Best practice provision
2.1.7 (“Independence of the
Supervisory Board”)
The Company does not comply
with best practice provision 2.1.7,
which determines, inter alia, that
more than half of the total number of
Non-Executive Directors should meet
the independence criteria as defined
in the Dutch Corporate Governance
Code. As long as Fides Food Systems
holds at least 30% of the shares,
it shall have the right to nominate
three of the five Non-Executive
Directors, and the nominees do
not need to be “independent”.
The Company believes this deviation
is justified by Fides Food Systems’
shareholding in the Company since
the IPO and the specific knowledge
and experience of the business of the
Company held by these Directors.
Accountability: UK and Dutch
Corporate Governance Codes
continued
UK Corporate Governance Code
continued
The Board will follow the
recommendation of the UK Corporate
Governance Code that an Executive
Director is expected to build up
a shareholding worth 100% or a
significant amount of their salary.
Pursuant to the Remuneration Policy
2018–20, the Chief Executive Officer
will be required to retain a minimum
of 5,000,000 shares (based on the
Group’s share price as at 31 December
2019, this equates to a value of
c.£2,620,000 million) subject to
remaining as an employee.
The Company does not currently
comply with the following principles
and best practice provisions of the UK
Corporate Governance Code:
Best practice provision 11
(“Independence of the Board”)
The Company does not comply
with best practice provision 11,
which determines that at least
half of the Board, excluding the
Chairman, should be considered
independent by the Board. As long
as Fides Food Systems holds at
least 30% of the shares, it shall
have the right to nominate three
of the five Non-Executive Directors,
and the nominees do not need to
be “independent”.
The Company believes this deviation
is justified by Fides Food Systems’
shareholding in the Company since
the IPO and the specific knowledge
and experience of the business of the
Company held by these Directors.
Best practice provision 18
(“Annual re-election of Directors”)
The Company does not comply with
best practice provision 18, which
determines that all directors should
be subject to annual re-election.
At the annual General Meeting in
2018 the directors were reappointed
for a period of two years, ending on
the day of the annual General Meeting
in 2020. The Company elected to
honour this reappointment and
schedule their reappointment for
the annual General Meeting in 2020
since these reappointments were
aligned with the agreed management
agreements which will need to
be renewed.
Best practice provision 24
(“Audit Committee”)
The Company does not comply
with best practice provision
24, which determines that the
Chairman of the Board should
not be a member of the Audit
Committee. The Company believes
that the members of the Audit
Committee should be independent
Non-Executive Directors with
relevant recent financial experience
and therefore believes it justified that
Mr Williams remains as a member
of the Audit Committee taking into
account the size and resources of
the Company and the right of Fides
Food Systems to nominate three
Non-Executive Directors.
Dutch Corporate Governance Code
The Dutch Corporate Governance
Code, dated 8 December 2016,
became effective on 1 January 2017
and has its statutory basis in Book 2
of the Dutch Civil Code. Dutch
companies whose shares are listed
on a regulated market (such as the
London Stock Exchange) are required
under Dutch law to disclose in their
annual reports whether or not they
apply the provisions of the Dutch
Corporate Governance Code and,
in the event that they do not apply
a certain provision, to explain the
reasons why. The Board has reviewed
the Dutch Corporate Governance
Code and supports the best practice
provisions thereof.
DP Eurasia N.V. Annual Report and Accounts 2019 | 63
Best practice provision 2.7.5
(“Accountability regarding
transactions: majority shareholders”)
The Company does not comply
with best practice provision 2.7.5,
which determines, inter alia, that all
transactions between the Company
and legal or natural persons who hold
at least 10% of the shares must be
agreed on terms that are customary
in the market and require the
approval of the Supervisory Board
(or the Non-Executive Directors in
a one-tier board). The Company
will alternatively comply with
Listing Rule 11, which requires
shareholder approval for related
party transactions which, by value,
exceed a de minimis threshold.
The Company believes this deviation
is justified because the Listing Rules
requirements are mandatory.
Best practice provision 3.1.2
(“Remuneration Policy”)
The Company does not comply
with best practice provision 3.1.2
(vi), which determines that shares
should be held for at least five
years after they are awarded.
The Company felt it important to
demonstrate to the executive team
that the scheme would deliver
value in the first three years to build
confidence in this unfamiliar type
of arrangement for Turkish and
Russian executives. Having a five-year
delay in getting any benefits would
reduce its effectiveness. However, for
the duration of the 2018–20
Remuneration Policy, the Chief
Executive Officer will be required
to retain a minimum of 5,000,000
shares. The Company believes that
a further two-year holding period
provides little additional incentive
given the size of his minimum
shareholding, subject to remaining
an employee. The Company believes
that with the current Remuneration
Policy, it ensured an alignment with
the interests of the shareholders.
Best practice provision 3.2.3
(“Severance payments”)
The Company does not comply
with best practice provision 3.2.3,
which determines, inter alia,
that remuneration in the event of
dismissal of employees should not
exceed one year’s salary. Although,
in the Company’s case, the Executive
Directors will normally under their
contracts not be entitled to be paid a
severance payment upon termination
that exceeds one year’s annual base
salary (the fixed remuneration) in
the preceding financial year and no
contractual severance payment will
be awarded in the event of seriously
culpable or negligent behaviour on
the part of the Executive Director,
Mr Saranga’s contract provides for an
additional compensation payment of
one year’s annual base salary payable
only in the event that termination
of his employment is due to him
being unable to work because of a
health condition. Where a contract
is terminated, the Company reserves
the right to make additional payments
where such payments are made in
good faith in discharge of an existing
statutory or legal obligation (or by
way of damages for breach of such
an obligation) or by way of settlement
or compromise of any claim arising
in connection with the termination
of an Executive Director’s office or
employment. Any such payments may
include, but are not limited to, paying
statutory severance compensation,
any fees for outplacement assistance
and/or the Executive Director’s
legal and/or professional advice
fees in connection with his or her
cessation of office or employment.
Payment would also be made for any
outstanding vacation days unused at
the date of cessation of employment.
Peter Williams
Chairman
26 March 2020
Management report 64 | DP Eurasia N.V. Annual Report and Accounts 2019
How we manage risk
The Audit Committee and management continuously
monitor the risk management, effectiveness and timely
implementation of the internal controls and provide
guidance for prioritisation and further improvement.
We identify
our risks
DP Eurasia
Risk Management
and Control Framework
The action
items are
regularly
monitored by
the Audit
Committee
We define
and implement
the controls
to mitigate
the risks
We assess the
risk impact
and prioritise
the risks
We prepare
the risk-based
internal
audit plan
We conduct
business and IT
process audits
Every business carries a certain
level of risk in order to achieve its
objectives and takes actions to
alter the risk’s impact or likelihood.
Identifying and managing risks is an
integral part of managing business.
The Group registers the principal risks
to the risk inventory and regularly
evaluates these risks.
The Group follows the DP Eurasia Risk
Management and Control Framework
for a continuous risk monitoring.
The risks are prioritised, assessed and
related mitigating actions are taken as
the basic principle of the framework.
The DP Eurasia Risk Management
and Control Framework is based on
the COSO 2017 framework, as “COSO
2017 Enterprise Risk Management –
Integrated Framework” addresses
the need for organisations to improve
their approach to managing risk to
meet the demands of an evolving
business environment for both
setting the strategy and driving the
performance.
As a key element of a robust risk
management and control framework,
the internal audit functions are
carried out by the DP Eurasia
Internal Audit and Risk Management
Department, which directly reports
to the Audit Committee and has full
access to all Group entities.
The DP Eurasia Internal Audit and
Risk Management Department
provides reasonable assurance to
the Audit Committee and the Board
on the design and effectiveness
of the business processes and
internal controls.
The Group Audit Committee
Charter, Internal Audit Charter
and Internal Audit Policy explain
the responsibilities and independence
of the Audit Committee and Internal
Audit function in accordance with the
International Internal Audit Standards.
DP Eurasia N.V. Annual Report and Accounts 2019 | 65
The Group’s employees are informed
about Code compliance requirements
when they join the Group. The Code
of Conduct is part of an employees’
onboarding program and is signed
when the employee joins the Group.
Also, refresher training is conducted
to increase awareness and ensure
that its values and the Code are
part of the daily operations of the
Group’s employees. To encourage
and motivate employees to comply
with the various rules and regulations
in their day-to day life, the Group
developed an e-learning program.
The programme will be ready to be
rolled out in 2020.
Also each supplier of the Group will
sign a Code of Conduct for every new
contract. This is a mandatory part of
the contract management system.
Compliance is part of the internal
audit program as well as the critical
supplier audit which includes a quality
audit. As part of the audit activities,
business practice compliance with the
Group standards and requirements
are assessed including the Group’s
Code of Conduct. In 2019, no
significant cases were reported
that have let to the termination
of a contract with one of the
Group’s suppliers.
The Group recognises the need to
have internal audits and a detailed
Code of Conduct policy, procedures
and reporting mechanisms in place
to protect our business integrity
and compliance with applicable
laws and regulations. All incidents of
actual or suspected integrity-related
cases reported through Hotline or
other resources are promptly and
thoroughly investigated. To the
best of our knowledge, we had no
cases of fraud, bribery or corruption,
which has a significant impact on
our business.
Anti-bribery
The DP Eurasia Anti-Corruption
and Anti-Bribery Policy emphasises
that any form of bribes or
inappropriate advantages are
prohibited by the Group and should
be reported immediately, and that
the gift receiving and giving rules
should be followed.
Whistleblowing
The Group is committed to a culture
of ethical and honest behaviour.
The Group encourages anyone to
report any violation of the Code of
Ethics and Business Conduct to an
independently managed hotline.
The DP Eurasia Whistleblower
Policy details the process to be
followed when a violation is reported.
The Group supports people to
feel comfortable about reporting
wrongdoings and ensures protection
throughout the process.
The cases reported through the ethics
hotline are thoroughly reviewed
and investigated by the DP Eurasia
Internal Audit and Risk Management
Department. The cases are assessed
by the Ethics Committee when
required. The ethics cases and actions
taken are periodically reported to the
Audit Committee.
Personal data protection
The Group has established
policies regarding personal data
protection law in accordance
with the applicable legislation of
the related countries where it exists.
These policies explain the principles
of personal data management
in line with the security and
processing measures.
The Group closely follows the
regulative requirements and takes
technical and administrative
actions accordingly.
Class training and e-learning classes
are conducted in order to increase
employee awareness on the personal
data protection law requirements.
A risk-based annual audit plan
reflecting assessment of business
units and strategic priorities for each
Group company is prepared with the
input of management and approved
by the Audit Committee on behalf
of the Board and discussed with
the Board on an annual basis. The
DP Eurasia Internal Audit and Risk
Management Department conducts
Business & IT Process Audits, special
investigations and periodic controls
according to a risk-based approach,
based on financial, operational and
compliance risks. The significant risk
areas, audit issues and effectiveness
of management action plans are
periodically reported to the Audit
Committee. The Audit Committee
and management monitor the
risk management, effectiveness
and timely implementation of
the internal controls and provide
guidance for prioritisation and
further improvement.
Corporate governance
and ethics culture
The Group has implemented various
policies and procedures in order to
define and standardise the Corporate
Governance Framework.
The Group’s values and “doing the
right thing” principle determine
its culture. The Group adopts the
“Tone at the Top” approach to
reflect its values, code of conduct and
corporate governance policies to the
employees and all the related parties.
Code of Conduct
The Code of Ethics and Business
Conduct mainly defines the general
rules on relations with and between
workers, relations with the market and
other stakeholders and relations with
the community. The Code of Conduct
strictly highlights that the Group
respects and promotes human rights
in all the cultural, socioeconomic
and geographic contexts in which it
operates, respecting the traditions
and cultures of, and providing
support for, local communities in
accordance with specific interests in
each region. Also, the Group prohibits
any situation involving or pertaining
to child or forced labour.
Management report 66 | DP Eurasia N.V. Annual Report and Accounts 2019
How we manage risk continued
The Group’s risk register
The Group categorises risks in
four types:
• strategic risks – the Group is willing
to take a certain level of risk by
assessing a risk/return approach
when doing business;
• operational risks – the Group
has a responsible approach to
operational risk management.
High quality products, customer
satisfaction and continuity of
production are the prioritised areas;
• financial risks – the Group
continuously assesses its financial
risks and seeks for the mitigations
to minimise the potential risk
impact; and
• compliance risks – compliance with
laws and regulations is essential for
the Group, which does not tolerate
non-compliance with laws.
The risks represent a snapshot of the
Group’s principal risks.
Strategic
Business dependency on Master Franchise Agreements (“MFAs”)
Group risk
Mitigation
• Expiration or termination of an MFA due to a breach of
• The Group has strong relations with Domino’s Pizza International.
the agreement or store franchise agreements may affect
the Group’s business operationally and financially.
• Since the Group’s ability to renew the MFAs is dependent upon
the good standing of the Group with respect to its contractual
relationships with the Master Franchisors (including under the
store franchise agreements) and its ability to agree a revised
development plan in the relevant country, the KPIs (e.g. store
opening, royalty performance etc.) are monitored very closely
by management and the Board, and required actions are taken
in order to address risky areas.
Operations and growth strategy dependency on the success of the sub-franchisees
Group risk
Mitigation
• The Group is reliant on the performance of
• The Group is significantly spending efforts on pricing strategies
sub-franchisees in successfully opening and operating
franchised stores and paying for supplies, royalties and
other fees to the Group on a timely basis.
• Franchise system risks are failure of sub-franchisees
to make payments to the Group, sub-franchisee
independence that may result in conflicts with Group
standards or financial performance issues going
undetected, non-renewal of a store franchise agreement
with sub-franchisees, etc.
to increase profitability of the franchised stores.
• The franchised stores’ financial and operating performance is
continually monitored.
• The payment performance of the stores is monitored by
management and remediation actions are taken to boost the
low-performing stores.
• Stores are regularly audited to prevent or detect any financial,
operational or compliance risks.
• Domino’s Pizza International and the Group have started
to conduct Food Safety Evaluation Audits in the stores to
monitor compliance.
DP Eurasia N.V. Annual Report and Accounts 2019 | 67
Growth strategy dependency on opening profitable new system stores
Group risk
Mitigation
• Failure to identify key geographical areas to open stores
• The Group spends significant efforts on obtaining and training
may result in failure to meet future expectations.
• Market saturation may become significant in the future
and could adversely affect system store sales growth.
sub-franchisees and personnel, creating customer awareness by
advertising and marketing activities.
• The Group continuously monitors the pipeline of proposed store
openings in terms of strategic location and profitability.
• Franchisee development programmes are continuously improving
to support the franchised stores.
• The Group works on improving the premise assessment and
rental process.
The Group’s dependency on infrastructure and internal systems to support the Group’s planned
growth and strategy: Digitalisation, disruptive technology and other innovation
Group risk
Mitigation
• Failure to enhance the Group’s existing internal systems
and controls, distribution and delivery networks and
information technology systems may adversely affect the
planned expansion.
• Failure to locate, hire, train and retain management and
operating personnel may result in not responding on
a timely basis to the changing demands of the Group,
operating the existing business less effectively.
• The Group is conducting an information technology (“IT”)
architecture development project in order to enhance and
strengthen the system architecture.
• The Group periodically monitors IT restructuring needs in order to
serve the rapidly changing challenges of the digital world.
• The IT team continuously analyses the system security
requirements, plans and takes the actions accordingly.
• The increase in the Group’s online presence in different channels
and better customer experience on online ordering platforms
distinctly improve access to consumers and penetration.
• The Group is strengthening and improving its online platform
technology in order to serve increasing consumer demands
and follow technological and innovative changes.
• The desktop and mobile web platforms run at Microsoft Azure
Cloud environment which provides security, scalability, availability,
performance, and consequently serves growth.
• In Turkey, as of the beginning of 2018, all applications except
online platforms were relocated at IBM Data Centre which
enables a sustainable and secure infrastructure.
• The DP Eurasia Internal Audit and Risk Management Department
conducts business process audits, performs risk assessments,
evaluates design and effectiveness of the process controls.
They monitor the remediation actions in terms of preventive/
detective and manual/system controls and provide consultancy
services to standardise the processes in order to mitigate the
risks. Additionally, IT General Control Audits will be conducted to
define the improvement areas and follow up management action
implementation to mitigate the risks.
• The Group moves the manual processes into the Workflow and
Document Management Platform which will enable business
process standardisation, preventive and detective control
implementation to the business processes and significant
risk mitigation. Business processes to be implemented to this
platform are subject to risk-based prioritisation and best practice
benchmarks.
• As part of the system security actions, ERP System Access Rights
are reviewed periodically.
Management report 68 | DP Eurasia N.V. Annual Report and Accounts 2019
How we manage risk continued
Strategic continued
Reliance on successful marketing initiatives
Group risk
Mitigation
• Failure to succeed in marketing initiatives may result in
• The Group has an agile and responsive working model as a retailer.
not generating higher sales.
• The Group’s spending of significant time and resources
in product innovation, advertising campaigns and store
designs and refurbishments may not generate increased
sales or profits.
• Closely monitoring the competitors and adopting best practice
benchmarks enables the Group to implement new opportunities
quickly and maximise the benefit from the marketing and product
innovation efforts.
• The Group continuously works on new product innovation projects
and performs pilot tests to enhance and expand the product
portfolio, consequently serving sales increase.
• The Group has launched a comprehensive price policy
restructuring project to enhance and implement pricing
methodology depending on different factors.
• The Group works on restructuring and enhancing new product
development and product enhancement processes to ensure
agility, instant responsiveness and wide variety.
• The Group is enhancing the product trial assessment process
to ensure speeding up the success criteria assessment and
replacement decisions.
The Domino’s Pizza brand and the Group’s reputation are critical to its business and success
Group risk
Mitigation
• The Group’s business could be negatively affected if
• The Group conducts random audits in stores and on the supplier
brand or reputation is harmed.
sites, monitors the results and takes the required actions.
• Any negative incident that affects consumer loyalty to
• Stores are regularly audited to prevent or detect any financial,
the brand could significantly reduce its value and damage
the Group’s business, such as:
operational or compliance risks (food safety audits, operational
evaluation reviews, store audits, mystery shopper audits, etc.).
• food safety concerns, including food tampering
or contamination;
• incidents of food-borne illness;
• the quality of the ingredients and food products;
• employee or customer injury, including driver accidents
causing serious injury; and/or
• employment-related claims relating to alleged
employment discrimination, wage and hour violations,
labour standards or healthcare and benefit issues.
• Domino’s Pizza International and the Group has started to conduct
Food Safety Evaluation Audits in the stores to monitor compliance
with the standards.
• Commissaries are audited annually by Domino’s Pizza International
in terms of quality, food safety, and occupational health and safety.
The results of the 2019 Turkish and Russian commissary audits
were over 92% in compliance in Russia (4 stars) and over 96% in
compliance in Turkey (5 stars) with Domino’s Pizza International
standards.
• In Russia, the Moscow commissary and stores are certified to
HACCP (Hazard Analysis and Critical Control Point). HACCP is an
internationally recognised system for reducing the risk of safety
hazards in food.
• In Turkey, the four commissaries are certified to ISO 22000. ISO
22000 is a food safety management system.
• The Group monitors the health and safety compliance
requirements in the corporate stores and premises and takes
preventive/detective actions accordingly.
DP Eurasia N.V. Annual Report and Accounts 2019 | 69
Competition from other pizza chains and fast-food restaurant chains may adversely affect the Group’s business
Group risk
Mitigation
• Increased presence and competition from aggregators
• The Group closely monitors its competitors and markets to
(which provide a food ordering and delivery platform by
offering access to multiple delivery restaurants through
a single online portal) supplying food ordering platforms
could lead to an increased level of competition for the
Group, as they improve access to delivery food options
for consumers.
prioritise significant challenges and focuses on increasing the
positive impact of the marketing, product innovation, online
channels and suitable store location efforts accordingly.
• The increase in the Group’s online presence in different channels
and better customer experience on online ordering platforms
distinctly improve access to consumers and penetration.
• The Group has launched a comprehensive price policy
restructuring project to enhance and implement pricing
methodology depending on different factors.
• Regular price perception research is conducted to analyse
consumer behaviour.
• Regular competitor price analyses are conducted and monitored
closely to take related actions.
Changes in consumer preferences
Group risk
Mitigation
• The fast-food restaurant market is affected by consumer
• The Group works consistently on enhancing and diversifying the
preferences and perceptions, and changes in these
preferences and perceptions may reduce the demand for
the Group’s products.
• Consumers’ expectations and health consciousness
is increasing, which may require the Group to adopt
changes on the products.
• New generation consumers’ expectations are becoming
more challenging.
products and menu in order to meet customer preferences.
• Qualitative and quantitative marketing tests are frequently used
for analysis.
• The Group works on restructuring and enhancing the new product
development and product enhancement processes to ensure
agility, instant responsiveness and wide variety.
• The Group is enhancing the product trial assessment process
to ensure speeding up the success criteria assessment and
replacement decisions.
• The Group is working on different projects to meet changing
customer demands such as online payment options, faster delivery
opportunities etc.
The Group’s dependency on key members of its senior management
Group risk
Mitigation
• The Group’s successful implementation of its strategy is
dependent on its ability to recruit, retain and motivate
high-quality senior management and other personnel
with extensive knowledge in the fast-food restaurant
industry.
• The loss of the services of any of the Group’s senior
managers could have a material adverse effect on its
business plans, product development, growth strategy,
marketing and other plans.
• The Group has the Selection and Appointment Committee focusing
on drawing up selection criteria and appointment procedures for
its Directors and senior managers.
• The Selection and Appointment Committee periodically assesses
the size and composition of the Board and makes a proposal
for a composition profile of the Board; periodically assesses the
functioning of individual senior managers, and reports on this to
the Board.
• The Selection and Appointment Committee draws up a plan for the
succession of Directors and senior managers, makes proposals for
appointments and reappointments and supervises the policy of the
Board regarding the selection criteria and appointment procedures
for Directors and senior managers to improve employee retention
and mitigate the risk of losing services of the Directors and/or
senior managers.
Management report 70 | DP Eurasia N.V. Annual Report and Accounts 2019
How we manage risk continued
Strategic continued
Macroeconomic and political developments
Group risk
Mitigation
• Macroeconomic and political changes are closely monitored by
the Group in order to mitigate or eliminate the potential effects by
implementing business continuity planning and crisis management
and incorporating those risks into the Group’s business strategies.
Macroeconomic and political developments in the world
and Turkey, Russia and the other jurisdictions in which the
Group operates may negatively affect the Group’s business,
results of operations, financial condition, cash flows
and prospects.
• The Group’s operations are located in Turkey, Russia,
Azerbaijan and Georgia, which are generally categorised
as emerging markets. Emerging markets are generally
subject to greater risk of being perceived negatively
by investors based upon external events than
more-developed markets, and financial turmoil in any
emerging market (or global markets generally) could
disrupt the business environment of the jurisdictions
in which the Group operates.
• Financial or political turmoil in one emerging market
country tends to adversely affect prices in credit, equity
and foreign exchange markets in other emerging market
countries, as investors move their money to more stable
and developed markets.
Climate change
Group risk
Mitigation
• Climate change effects may cause business interruption
on the Group’s operations.
The Group is working on updating its business continuity policies in
order to be more prepared for the potential climate change impacts:
• crisis management;
• disaster recovery plan; and
• business continuity management.
Impact of a pandemic
Group risk
Mitigation
The Group could be adversely affected from the global
pandemic COVID-19.
• We see increased uncertainties following the COVID-19
worldwide outbreak and market volatility, which have no
relation to the business operations in the year to date.
• While our stores are open and operating under the
ordinary course of business currently, we believe
our business could be impacted for a period of time.
These impacts could vary from reduced store operating
hours to cancellation of eat-in and/or take-away, to
complete store closures for an unspecified period of
time at the extreme.
• These conditions could indicate the possible existence of
a material uncertainty which may cast significant doubt
on the entity’s ability to continue as a going concern and,
therefore, that it may be unable to realise its assets and
discharge its liabilities in the normal course of business.
The Group is assessing the potential impact/worst case scenarios and
taking many measures to ensure business continuity. The main focus
areas are:
• people;
• operations;
• supply chain;
• suppliers; and
• finance.
As part of the Group’s crisis management policy, the crisis
management teams are taking the required measures, and
closely following the guidelines announced by global and local
health authorities.
Moreover, the Group has launched contactless delivery and online
payment in order to ensure our customers and employees continue
to be safe while interacting together.
DP Eurasia N.V. Annual Report and Accounts 2019 | 71
Operational
Reliance on third-party suppliers
Group risk
Mitigation
Reliance on third-party suppliers and service providers may
result in shortages or interruptions in the supply of raw
materials, ingredients or complementary products.
• The Group periodically seeks alternative suppliers for critical
materials and services to prevent any material shortages in
case of a disruption in our principal suppliers’ operations.
• The Group’s and its sub-franchisees’ business is
dependent on frequent deliveries from third-party
suppliers of raw materials, ingredients and
complementary products that meet the Group’s
specifications. Suppliers may fail to provide necessary
products on a timely basis or to the agreed-upon
standard, may discontinue or limit their products or
may seek to charge the Group higher prices.
• Shortages or interruptions from suppliers may be caused
by unanticipated demand, problems in production or
distribution, inclement weather or other conditions.
• The Group also has emergency plans in place in the event of
a disruption of operations at our commissaries or suppliers.
• Supplier audits are periodically performed in order to monitor
supplier performance and compliance.
• Supplier evaluation is performed annually to monitor the supplier
performance as per the risk criteria and take the required actions.
Labour shortages
Group risk
Labour shortages or increased labour costs would
negatively affect the Group’s business.
• Labour is a significant component in the cost of operating
the Group’s corporate stores. If the Group faces labour
shortages or increased labour costs because of increases
in competition for employees, employee turnover,
employee benefits costs, minimum wage raises or
changes in employment law requirements in the countries
in which the Group operates, its operating expenses
could increase and the Group’s growth and profitability
could be adversely affected.
Mitigation
• The Group is spending efforts on different engagement activities
to decrease employee turnover, and attract, motivate and retain
qualified employees.
• The Group also closely monitors and anticipates governmental
laws and government incentives in order to obtain an advantage in
potential labour cost increases.
• The Group is implementing new technologies such as its
GPS project to monitor operating effectiveness and take the
required measures.
Financial
Increase in food cost and other supplies
Group risk
Mitigation
The Group continually looks for ways to partially offset inflation and
other changes in the costs of core raw materials by:
• applying efficient purchasing practices;
• productivity improvements;
• greater economies of scale; and
• gradually increasing certain product prices.
Increased costs of food and other supplies could decrease
the Group’s operating margins or cause the Group to limit
or otherwise modify its product variety.
• The Group’s profitability depends in part on its ability
to manage changes in the price and availability of food
and other commodities including dairy, meat, poultry,
flour and cardboard. Prices may be affected by market
movements, seasonality, increased competition, the
general risk of inflation, shortages or interruptions in
supply due to the weather, disease or other conditions
beyond the Group’s control.
• These events, combined with other more general
economic and demographic conditions, could impact
the Group’s pricing and negatively affect the Group’s
system sales, the Group’s commissary sales and
operating margins.
Management report 72 | DP Eurasia N.V. Annual Report and Accounts 2019
How we manage risk continued
Financial continued
Exchange rate fluctuations and cash flow management
Group risk
Mitigation
Exchange rate fluctuations could have an adverse effect on
the Group.
• The Group’s results of operations and financial condition
have been, and will continue to be, affected by changes
in the value of the Turkish Lira (the Group’s presentation
currency) against the Russian Rouble or Euro and
between the Euro and the Russian Rouble, because a
portion of the Group’s revenue and costs is linked to
these currencies.
• Cash flow risk and not meeting the debt covenant may
adversely affect the business.
• The Group mitigates this risk by agreeing fixed exchange rates with
its suppliers, wherever possible.
• The Group controls exposure to the exchange rate fluctuations by
minimising the foreign currency nominated borrowing.
• The Group’s bank loans consist of TRY and RUB currencies (related
country’s local currency) in order to eliminate hard currency risk.
• The Group currently utilises internal cash flow and bank borrowings
in Turkey and Russia for its financing needs. The Group has debt
covenants with respect to its bank borrowings in Russia, which
the Board and the management believe will be met in 2020.
Furthermore, the Group has additional borrowing capacity from
Turkish banks, which it can draw down for liquidity needs and to
cure any potential covenant breaches with respect to its bank
borrowings in Russia.
Compliance
Risk of litigation from customers, sub-franchisees, employees and others in the ordinary course of business
Group risk
Mitigation
Risk of litigation from customers, sub-franchisees,
employees and others in the ordinary course of business,
which diverts financial and management resources.
• Stores are regularly audited to prevent or detect any financial,
operational or compliance risks (food safety audits, operational
evaluation reviews, store audits, mystery shopper audits, etc.).
• Claims of illness or injury relating to food quality or food
handling are common in the food service industry. In
addition, class action lawsuits have been filed, and may
continue to be filed, against various fast-food restaurants
alleging, among other things, that fast-food restaurants
have engaged in deceptive advertising, sales and
promotions which encourage obesity.
• Further, the Group may be subject to employee,
sub-franchisee and other claims in the future based on,
among other things, discrimination, harassment, wrongful
termination, wages and overtime compensation as well
as rest break and meal break issues. Such claims and
disputes may divert management resources, create
adverse publicity and could lead to an adverse judgement
against the Group, which could adversely affect the
Group’s business, results of operations, financial
condition, cash flows and prospects.
• The employees are regularly trained on the Group Code of
Conduct, corporate governance policies, changing laws and
regulations as needed to increase awareness.
• The legal and regulative requirements based on changing laws and
regulations are reflected in the contracts via additional protocols to
prevent any disputes.
• The supplier Code of Conduct is shared with the suppliers as part
of the contract to ensure compliance and increase awareness.
• The Group has an independent hotline enabling internal and
external parties to report Code of Conduct conflicts such as
potential monetary frauds, quality concerns, wrongful termination,
wages issues, etc. The cases are investigated by Internal Audit and
Risk Management Department and preventive/detective actions
are taken in order to enhance business processes and prevent
repetition of these cases.
• Both Turkey and Russia have in-house lawyers on top of external
law firm to work closely with business units and mitigate
litigation cases.
DP Eurasia N.V. Annual Report and Accounts 2019 | 73
Violation of data protection laws
Group risk
Mitigation
Violations of data protection laws carry fines and expose
the Group and its employees to criminal sanctions and
civil suits.
• The Group periodically reviews data protection law compliance
with internal and external support and takes required actions as
needed.
• Non-compliance with data protection laws could expose
• Personal data protection law compliance audits are conducted
annually.
• System security requirements regarding data protection laws are
continuously assessed by the IT team to take the required measures.
the Group to regulatory investigations, which could result
in fines and penalties.
• Regulators may issue orders to stop processing personal
data in addition to imposing fines, which could disrupt
operations.
• The Group could be subject to litigation from persons
or corporations allegedly affected by data protection
violations.
• Any violation of these laws could harm the Group’s
reputation, which could have a material adverse effect on
the Group’s earnings, cash flows and financial condition.
Violation of changing regulations
Group risk
Mitigation
• Regulatory changes (e.g. personal data protection law,
• The Group is closely monitoring the changes in regulative
quality regulations, product regulations etc.) are affecting
the business processes and non-compliance may result in
penalties and reputation risk.
requirements and taking the necessary measures in order to
ensure compliance.
• Online or class training are conducted for our employees to
increase awareness and ensure compliance related to new
regulations or laws.
• Consultancy services are received from third parties with expertise
related to regulatory or legal changes.
Management report 74 | DP Eurasia N.V. Annual Report and Accounts 2019
How we manage risk continued
Compliance continued
Reliance on information technology and risk of security breaches or failures
Group risk
Mitigation
• The Group is heavily reliant, as part of its online strategy,
on information systems, including for online ordering
platforms, point-of-sale processing in its system stores,
management of its supply chain, accounting, payment
of obligations, collection of cash, processing of credit
and debit card transactions and other processes and
procedures.
• Breaches of the Group’s cybersecurity measures could
result in unauthorised access to the Group’s systems,
misappropriation of information or data, including
personal information, deletion or modification of user
information, or a denial-of-service or other interruption
to the Group’s business operations.
• As techniques used to obtain unauthorised access to,
or sabotage, systems change frequently and may not be
known until launched against the Group or the Group’s
third-party service providers, the Group may be unable
to anticipate, or implement adequate measures to protect
against, these attacks.
• The Group is conducting an Information Technology architecture
development project in order to enhance and strengthen the
system architecture.
• The IT team continuously analyses the system security
requirements, plans and takes action accordingly.
• A data leak prevention system is used for prevention and
detection of data leaks in enterprise business applications.
• IT General Control Audits will be conducted to define the
improvement areas and follow up management action
implementation to mitigate the risks.
• The Group is in the process of hiring a Cyber Security Officer to
ensure effective and close management of security requirements.
• The Group has initiated a two-year cybersecurity programme
with Deloitte Turkey Cyber Risk Services, in order to protect
the sensitive information that it acquires in the function of its
operations.
Conclusion
In 2019, no major failings in the risk management and control systems were identified. The Group will continue to
identify and monitor principal and emerging risks and implement mitigation actions to minimise or eliminate their
potential impact.
DP Eurasia N.V. Annual Report and Accounts 2019 | 75
Board declaration
The Board of DP Eurasia N.V. hereby
declares, in accordance with article
5:25c of the Dutch Act on Financial
Supervision and best practice
provision 1.4.3 of the Dutch Corporate
Governance Code, that to the best of
its knowledge:
• the financial statements as included
on pages 80 to 133 of the Annual
Report provide a true and fair view
of the assets, liabilities and financial
position as at 31 December 2019
as well as the profit or loss of DP
Eurasia N.V. and all the business
undertakings included in the
consolidation in accordance with
IFRS as adopted in the European
Union and Part 9 of Book 2 of the
Dutch Civil Code;
• the management report included
in this Annual Report provides a
true and fair view of the condition
on the balance sheet date and of
the business performance during
the financial year of DP Eurasia
N.V. and the companies associated
with it whose details are included
in the financial statements,
together with a description of the
main risks DP Eurasia N.V. faces.
The members of the Board have
signed the financial statements
pursuant to their statutory
obligation under article 2:101(2)
of the Dutch Civil Code;
• the Board is responsible for
preparing the Annual Report
in accordance with applicable
laws and regulations and the
Board considers that the Annual
Report, taken as a whole, is fair,
balanced and understandable
and provides information
necessary for shareholders to
assess the Company’s position
and performance, business model
and strategy;
• based on their assessment of
prospects and viability, the Board
confirms it has a reasonable
expectation that the Group will
be able to continue in operation
and meet its liabilities as they fall
due over the next twelve months,
although there is uncertainty
caused by the worldwide COVID-19
outbreak as discussed in detail in
the going concern assumption on
page 85;
• the management report included
in this Annual Report provides
sufficient insights into any failings
and the effectiveness of the
internal risk management and
control systems, whose systems
provide reasonable assurance that
the financial reporting does not
contain any material inaccuracies;
• based on the current state of
affairs, it is justified that the
financial reporting is prepared
on a going concern basis; and
• the management report included
in this Annual Report states those
material risks and uncertainties
that are relevant to the expectation
of the Company’s continuity for
the period of twelve months
after the preparation of this
management report.
By order of:
Aslan Saranga
(Chief Executive Officer)
Frederieke Slot
(Executive Director)
Peter Williams
(Non-Executive Director)
Seymur Tari
(Non-Executive Director)
Izzet Talu
(Non-Executive Director)
Aksel Sahin
(Non-Executive Director)
Thomas Singer
(Non-Executive Director)
26 March 2020
Management report Shareholders
Major shareholders
At the IPO, shares were offered to
institutional investors in the UK and
certain other jurisdictions. The listing
significantly broadened the
Company’s shareholder base, and the
Company’s shares are widely spread
over a large number of shareholders
in various countries.
Shareholder structure
Under Dutch law, shareholders must
disclose percentage holdings in the
capital and/or voting rights in the
Company when such holding reaches,
exceeds or falls below 3%, 5%, 10%,
15%, 20%, 25%, 30%, 40%, 50%, 60%,
75% and 95%. Such disclosure must
be made to the Dutch Authority
for the Financial Markets (“AFM”)
without delay. The Group’s major
shareholdings are included in the
Substantial Holdings register of
the AFM.
According to the register kept by the
AFM, the following shareholders have
disclosed that they own 3% or more
of DP Eurasia’s total share capital as
at 25 March 2020.
76 | DP Eurasia N.V. Annual Report and Accounts 2019
Shares and shareholders
Shares
Our shares
The shares that are traded on the
London Stock Exchange are traded
under the symbol DPEU with ISIN
code NL0012328801. DP Eurasia is
included in the FTSE SmallCap and
FTSE All-Share indices.
The authorised capital of the
Company comprises a single class
of registered shares. Shares that
are traded via the CREST system,
the paperless settlement system
of the London Stock Exchange,
are registered under the name and
address of Link Market Services
Trustee Limited (the “Depositary”).
All issued shares are fully paid-up
and each share confers the right
to cast a single vote in the General
Meeting. DP Eurasia’s issued share
capital on 31 December 2019 was
€17,444,689.68, consisting of
145,372,414 ordinary shares of
€0.12 each.
At the 2019 Annual General Meeting,
the Board was designated as the
corporate body authorised to issue
shares or to grant rights to subscribe
for shares limited to a maximum of
one-third of the issued share capital
of the Company as at 29 May 2019
and to restrict or exclude pre-emptive
rights accruing to shareholders
of the Company: (i) in connection
with the issuance of shares limited
to a maximum of 5% of the issued
share capital as at 29 May 2019 but
so that such authorisation may be
used only for general corporate
purposes; and (ii) in connection with
the issuance of shares limited to a
maximum of 5% of the issued share
capital as at 29 May 2019, but so
that such authorisation may be used
only for the purposes of financing
(or refinancing, if the authorisation
is to be used within six months after
the original transaction) a transaction
which the Board determines to
be an acquisition or other capital
investment of a kind contemplated
by the Statement of Principles on
Disapplying Pre-Emption Rights
most recently published by the UK
Pre-Emption Group prior to the date
of the 2019 AGM.
By virtue of its authorisation by the
General Meeting, the Board is also
authorised to acquire fully paid-up
shares in the capital of the Company,
up to a maximum of 10% of the issued
share capital, provided that the
Company will not hold more shares
in its own capital than a maximum
of 50% of the issued capital of the
Company, either through a purchase
on a stock exchange or otherwise,
the repurchase can take place for a
minimal price, excluding expenses,
of the nominal value of the shares
and a maximum price of the higher
of: (i) an amount equal to 5% above
the average of the middle market
quotations for the shares taken from
the London Stock Exchange Daily
Official List for the five business days
immediately preceding the day on
which such shares are contracted to
be purchased; and (ii) the highest
current independent bid on the
London Stock Exchange Daily Official
List at the time that the purchase
is carried out as stipulated by the
Commission – adopted Regulatory
Technical Standards pursuant to
Article 5 paragraph 6 of the Market
Abuse Regulation.
These designations and
authorisations have been given for
a period of 15 months ending on the
earlier of the conclusion of the 2020
AGM or the close of business on
29 August 2020. Such authorities are
renewed annually and authority will
be sought at the 2020 AGM.
Dividend policy
The Group does not expect to declare
any dividends in 2020. In future years,
the Group will consider the payout
of dividends, taking into account the
amount of profits, the need for cash
for capital expenditure and further
expansion and its debt profile.
As such, while the Group’s policy is
to eventually pay out dividends in the
appropriate circumstances, there is
no immediate prospect of dividends
being paid out, nor can there be
any assurance as to when and in
what amount any dividends may
be eventually paid out.
DP Eurasia N.V. Annual Report and Accounts 2019 | 77
Share/vote %
Amount
32.81
5.57
3.11
47,697,882
8,106,310
—
Controlling shareholder
For so long as there is a controlling
shareholder (defined in the Listing
Rules as any person who exercises or
controls on their own or together with
any person with whom they are acting
in concert, 30% or more of the votes
able to be cast on all or substantially
all matters at general meetings of
a company), the Board rules allow
for the election or re-election of any
independent Director to be approved
by separate resolutions of: (i) the
Company’s shareholders; and (ii) the
Company’s shareholders excluding
any controlling shareholder. If either
of the resolutions is defeated, the
Company may propose a further
resolution to elect or re-elect the
proposed independent Director,
which: (a) may be voted on within
a period commencing 90 days and
ending 120 days from the original
vote; and (b) may be passed by a vote
of the shareholders of the Company
voting as a single class.
25 March 2020
Fides Food Systems Coöperatief U.A.(1)
Mr Saranga
Wellington Management Company
(1) Held by Turkish Private Equity Fund II L.P.
General Meeting
The Company will organise a
General Meeting at least once a
year. The agenda with notes and the
registration process are published
with the notice convening the
meeting at least 42 days beforehand
and are also available on the
Company’s website. The notes
contain all relevant information
with regard to the resolutions on
the agenda. Each shareholder
may attend General Meetings,
address the General Meeting and
exercise voting rights pro rata to his
shareholding, either in person or by
proxy. Shareholders may exercise
these rights, if they are the holders
of shares on the record date, which
is the 28th day before the day of the
General Meeting, and they or their
proxy have notified the Company of
their intention to attend the General
Meeting. The Company shall give
shareholders and other persons
entitled to vote the possibility of
issuing proxy votes to an independent
third party. All proxy votes received
are counted with the balance for
and against and any votes withheld
announced at the General Meeting
and published on the Company’s
website after the meeting.
The Company’s articles of association
set out in detail the power of the
General Meeting. Resolutions
requiring the prior approval of the
General Meeting are, amongst others:
• adoption of the Company’s
annual accounts;
• amendments to the articles
of association;
• deciding on the remuneration
policy of the Board;
• appointment and dismissal of
Board members;
• appropriation of profits to the
extent not added to the reserves;
• appointing the external auditor;
• transferring the Company or
virtually the entire Company to
a third party; and
• dissolution of the Company.
Subject to certain exceptions as
set forth by law or the articles of
association, resolutions of the General
Meeting are passed by an absolute
majority of the votes cast.
Draft minutes of the meeting will
be released within three months of
the meeting and will be available
for comments for three months
thereafter. The final minutes will be
published on the Company’s website.
This year, the AGM is scheduled to be
held on 3 June 2020 in Amsterdam,
the Netherlands.
Management report
78 | DP Eurasia N.V. Annual Report and Accounts 2019
Shares and shareholders continued
Controlling shareholder
continued
Furthermore, in the event that
the Company wishes the FCA to
cancel the listing of the shares on
the premium listing segment of the
Official List or transfer the shares
to the standard listing segment of
the Official List, the Company must
obtain at a General Meeting prior
approval of:
(i) a majority of not less than 75% of
the votes attaching to the shares
voted on the resolution; and
(ii) a majority of the votes attaching
to the shares voted on the
resolution excluding any shares
voted by a controlling shareholder.
In all other circumstances,
controlling shareholders have and
will have the same voting rights
attached to the shares as all other
shareholders.
Impact of Brexit on the Group
The Group is subject to “shared
jurisdiction” between the UK and the
Netherlands with respect to takeover
offers. The concept of the shared
jurisdictions rules was introduced by
the EU Takeover Directive. Shared
jurisdiction applies where the target
(in this instance DP Eurasia) has its
registered office in one EEA Member
State (the Netherlands) and its
shares are admitted to trading on a
regulated market (such as the main
market of London Stock Exchange) in
another EEA Member State (but not
also in the Member State where it has
its registered office).
Based on this Takeover Directive, the
Dutch takeover rules will no longer
be applicable if the UK is no longer
an EEA Member State.
Based on the draft set of regulations
(Takeovers (Amendment) (EU
Exit) Regulations 2019 (Takeovers
Regulations)) and a Consultation
Paper (Panel Consultation Paper on
the United Kingdom’s withdrawal
from the European Union (PCP
2018/2)) which sets out the
framework of how the UK takeover
rules will apply post-Brexit, the UK
Panel on Takeovers and Mergers
will delete the shared jurisdiction
rules from the UK Code. This means
that also the UK takeover rules may
also no longer be applicable for the
Company following a transitional
period.
Due to Fides’ shares in the current
shareholder structure, the Group is
not at risk.
Related regulation updates are closely
followed up to take required actions
and mitigate any potential risk.
Relationship Agreement and
the controlling shareholder
The Company considers that TPEF II,
through its subsidiary Fides Food
Systems, exercises or controls on its
own, or together with any person
with whom it is acting in concert,
more than 30% of the votes to be
cast on all or substantially all matters
at General Meetings. In order to
ensure that the Company can carry
on as an independent business as
its main activity, on 28 June 2017,
the Company and Fides Food
Systems entered into a relationship
agreement which regulates the
ongoing relationship between the
Company and Fides Food Systems
and its associates, including TPEF II
(the “Relationship Agreement”).
The Relationship Agreement
contains, among others, undertakings
from Fides Food Systems that:
(i) transactions and arrangements
with it (and/or any of its associates
(including TPEF II)) will be conducted
at arm’s length and on normal
commercial terms; (ii) neither it nor
any of its associates will take any
action that would have the effect
of preventing the Company from
complying with its obligations under
the Listing Rules; (iii) neither it nor
any of its associates will propose or
procure the proposal of a shareholder
resolution which is intended or
appears to be intended to circumvent
the proper application of the Listing
Rules; (iv) neither Fides Food Systems
nor any of its associates will take
any action that would affect the
ability of the Company to carry on its
business independently of Fides Food
Systems; and (v) it will not cause or
authorise to be done anything which
would prejudice either the Company’s
status as a company whose shares
are admitted to the premium listing
segment of the Official List and
to trading on the London Stock
Exchange’s main market for listed
securities or its suitability for listing
(the “Independence Provisions”).
The Relationship Agreement will
continue for so long as: (a) the
shares are listed on the premium
listing segment of the Official List
and traded on the London Stock
Exchange’s main market for listed
securities; and (b) Fides Food
Systems, together with its associates,
is entitled to exercise or to control the
exercise of 10% or more of the votes
able to be cast on all, or substantially
all, matters at General Meetings.
The Group believes that the terms
of the Relationship Agreement will
enable the Group to carry on its
business independently of TPEF II.
Furthermore, Fides Food Systems has
agreed to procure the compliance of
its associates (including TPEF II) with
the Independence Provisions.
The Company has complied with,
and so far as the Company is aware,
Fides Food Systems has complied
with, sub-paragraphs (i), (ii) and (iii)
of the Independence Provisions set
out above.
DP Eurasia N.V. Annual Report and Accounts 2019 | 79
Meetings
Briefings are given to update
the market after each quarterly
announcement via group meetings
or teleconference and are accessible
by telephone or through the internet.
Meetings with investors (bilateral and
general) are held regularly to ensure
that the investment community
receives a balanced and complete
view of the Company’s performance
and the issues faced by the business,
while always observing applicable
rules concerning selective disclosure,
equal treatment of shareholders and
insider trading.
Analysts’ reports and valuations
are not assessed, commented upon
or corrected, other than factually,
by the Company. DP Eurasia does not
pay any fee(s) to parties for carrying
out research for analysts’ reports or
for the production or publication of
analysts’ reports. Contacts with the
capital markets are dealt with by the
Chief Executive Officer, the Chief
Strategy Officer and Head of Investor
Relations and, from time to time,
certain Non-Executive Directors.
Conflicts of interest
Save as set out below (and above
under “Relationship Agreement
and the controlling shareholder”),
there are no potential conflicts of
interest between any duties owed
by the Directors or senior managers
to the Company and their private
interests or other duties. Fides
Food Systems and Vision Lovemark
Coöperatif U.A. (the “Founding
Shareholders”) have agreed
with certain members of senior
management (but not any Director)
to pay to them an incentivisation
bonus in connection with future sales
by these shareholders in accordance
with a special option scheme. Certain
other employees are also entitled
to cash payments from the Founding
Shareholders upon future share
sales by the Founding Shareholders,
determined with reference to monthly
salaries and the proportionate of a
sale by the Founding Shareholders.
Total payments to members of senior
management and employees in
connection with these arrangements
could constitute a multiple of their
annual compensation, should the
Founding Shareholders dispose of
their entire interest in the Company,
and is dependent on the prices
realised in connection with such sales.
The members of senior management
entitled to receive the incentive
payments are the Chief Financial
Officer, the Chief Executive
Officer of the Russian Operations
and, with respect to the Turkish
Operations, the Franchise Operations
and International Development
Director, the Corporate Operations
Director and the Human Resources
Director.
The Company believes that
the private interests of those
members of senior management
in potentially wishing to maximise
the price of the shares, including
through the performance of the
Company, will likely be aligned
with the interests of the Company
and the shareholders as a whole.
However, there is a potential conflict
between the interest of those
members of senior management
and the longer-term interests of
the Company. The Company believes
that any such risk will be mitigated
through the Board’s oversight of
the Company and the procedures
imposed through the Board Rules
and the authorities delegated
throughout the Group which reserve
material decision-making power to
the Board (such as matters relating to
governance, dividend policy, strategy,
the incurrence of capital expenditure
or the entering into of commercial
contracts in each case in an amount
exceeding €1,000,000).
Investor relations policy
The Company is committed to
maintaining an open and constructive
dialogue with the investment
community. The Company is
aiming to keep its shareholders
updated by informing them equally,
simultaneously, clearly and accurately
about the Company’s strategy,
performance and other Company
matters and developments that could
be relevant to investors’ decisions.
The Company will act in accordance
with applicable rules and regulations,
including provisions on price-sensitive
information, fair and non-selective
disclosure and equal treatment
of shareholders that are in the
same position.
The Company communicates with all
of its investors and analysts through
organising or attending meetings
such as the AGM, roadshows, broker
conferences and capital market days.
Furthermore, the Company publishes
Annual Reports, Half-yearly Reports
and trading updates.
Management report 80 | DP Eurasia N.V. Annual Report and Accounts 2019
Consolidated statement of comprehensive income
For the years ended 31 December 2019 and 2018
Revenue
Cost of sales
Gross profit
General administrative expenses
Marketing and selling expenses
Other operating income
Other operating expense
Operating profit
Foreign exchange income/(losses)
Financial income
Financial expense
Profit/(loss) before income tax
Income tax expense
Loss for the period
Other comprehensive (expense)/income
Items that will not be reclassified to profit or loss
Notes
4
4
6
6
7
7
7
21
2019
2018
980,208
(636,466)
343,742
(150,175)
(137,043)
22,411
(7,869)
71,066
4,665
16,100
(85,103)
6,728
(12,344)
(5,616)
(21,708)
856,874
(566,250)
290,624
(136,145)
(104,294)
10,466
(7,361)
53,290
(18,770)
5,508
(43,927)
(3,899)
(7,194)
(11,093)
10,015
– Remeasurements of post-employment benefit obligations, net of tax
(107)
(291)
Items that may be reclassified to profit or loss
– Currency translation differences
Total comprehensive loss
Loss per share(1)
(1) Amounts represent the basic and diluted earnings per share.
The accompanying notes form an integral part of these consolidated financial statements.
(21,601)
(27,324)
(0.0386)
10,306
(1,078)
(0.0763)
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 81
Consolidated statement of financial position
At 31 December 2019
Assets
Trade receivables
Lease receivables
Right-of-use assets
Property and equipment
Intangible assets
Goodwill
Deferred tax assets
Other non-current assets
Non-current assets
Cash and cash equivalents
Trade receivables
Lease receivables
Inventories
Other current assets
Current assets
Total assets
Equity
Paid in share capital
Share premium
Contribution from shareholders
Other reserves not to be reclassified to profit or loss
Notes
31 Dec
2019
31 Dec
2018
14
17
11
9
10
12
21
17
13
14
17
16
17
23
23,422
39,568
180,236
160,043
81,424
47,133
18,060
35,903
20,761
—
—
136,041
48,514
45,195
12,187
25,389
585,789
288,087
70,928
114,493
16,618
70,062
65,247
337,348
923,137
36,353
119,286
19,970
28,444
69,979
—
77,619
45,584
221,626
509,713
36,353
119,286
20,697
– Remeasurements of post-employment benefit obligations
(2,591)
(2,484)
Other reserves to be reclassified to profit or loss
– Currency translation differences
Retained earnings
Total equity
Liabilities
Financial liabilities
Lease liabilities
Long-term provisions for employee benefits
Deferred tax liability
Other non-current liabilities
Non-current liabilities
Financial liabilities
Lease liabilities
Trade payables
Current income tax liabilities
Provisions
Other current liabilities
Current liabilities
Total liabilities
Total liabilities and equity
18
18
17
21
17
18
18
14
21
19
17
(22,288)
(40,332)
110,398
(687)
(34,716)
138,449
153,159
184,708
2,051
—
37,041
376,959
164,854
71,427
121,178
8,955
5,354
64,012
435,780
812,739
923,137
161,600
9,676
1,665
565
28,373
201,879
36,541
7,789
74,148
6,971
1,816
42,120
169,385
371,264
509,713
The accompanying notes form an integral part of these consolidated financial statements.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
82 | DP Eurasia N.V. Annual Report and Accounts 2019
Consolidated statement of changes in equity
For the year ended 31 December 2019
Remeasurement
of post-
Contribution employment
benefit
from
Currency
translation
premium shareholders obligations differences
Share
Share
capital
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
Total loss for the period
Currency translation adjustments
Total comprehensive loss
Share-based incentive plans (Note 22)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(291)
—
—
—
—
—
(291)
(11,093)
(11,093)
10,306
—
10,306
(291)
10,306
(11,093)
(1,078)
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
Currency translation adjustments
Total loss for the period
Total comprehensive loss
Cancellation of share-based incentive (Note 22)
Share-based incentive plans (Note 22)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(107)
—
(21,601)
—
—
(107)
(21,601)
—
(5,616)
(5,616)
—
—
(107) (21,601)
(5,616) (27,324)
(2,729)
2,002
—
—
—
—
—
—
(2,729)
2,002
Balances at 31 December 2019
36,353
119,286
19,970
(2,591) (22,288) (40,332) 110,398
The accompanying notes form an integral part of these consolidated financial statements.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 83
Consolidated statement of cash flows
For the year ended 31 December 2019
Profit/(loss) before income tax
Adjustments for:
Depreciation
Amortisation
Gains on sale of property and equipment
Performance bonus accrual
Non-cash employee benefits expense – share-based payments
Interest income
Interest expense
Unrealised foreign exchange losses on borrowings
Changes in operating assets and liabilities
Changes in trade receivables
Changes in other receivables and assets
Changes in inventories
Changes in contract assets
Changes in contract liabilities
Changes in trade payables
Changes in other payables and liabilities
Income taxes paid
Performance bonuses paid
Cash flows generated from operating activities
Purchases of property and equipment
Purchases of intangible assets
Disposals from sale of tangible and intangible assets
Cash flows used in investing activities
Interest paid
Interest on leases paid
Interest received
Loans obtained
Loans paid
Payment of lease liabilities
Cash flows (used in)/generated from financing activities
Effect of currency translation differences
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning of the period
Cash and cash equivalents at the end of the period
Notes
9-11
10
6
22
7
7
21
9
10
18
18
12
12
31 Dec
2019
6,728
94,746
21,960
11
4,562
(727)
(16,100)
78,506
—
(52,348)
(23,794)
7,557
(294)
4,246
47,030
27,010
(15,918)
(7,009)
176,166
(54,715)
(48,228)
15,039
(87,904)
(40,255)
(22,031)
1,837
165,233
(85,453)
(60,875)
(41,544)
(4,234)
42,484
28,444
70,928
31 Dec
2018
(3,899)
37,018
16,250
(4,054)
7,408
2,514
(5,508)
41,512
11,473
(10,535)
(2,156)
(21,360)
(1,650)
8,722
14,078
(8,194)
(6,788)
(5,876)
68,955
(49,324)
(24,036)
25,987
(47,373)
(37,353)
—
5,508
59,848
(104,957)
(10,653)
(87,607)
18,341
(47,684)
76,128
28,444
The accompanying notes form an integral part of these consolidated financial statements.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
84 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements
For the year ended 31 December 2019
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; and
• 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
franchised 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 rights in 765 stores (521 franchised
stores, 244 corporate-owned stores) (31 December 2018: 724 stores (486 franchised stores, 238 corporate-owned stores)).
The consolidated financial statements as at and for the period ended 31 December 2019 have been approved and
authorised 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 the nature of their businesses are as follows:
Subsidiaries
Pizza Restaurantları A.Ş. (“Domino’s Turkey”)
Pizza Restaurants LLC (“Domino’s Russia”)
Fidesrus B.V. (“Fidesrus”)
Fides Food Systems B.V. (“Fides Food”)
2019
Effective
2018
Effective
ownership ownership
(%)
(%)
100
100
100
100
100
100
100
100
Registered
country
Turkey
Russia
Nature of
business
Food delivery
Food delivery
The Netherlands Investment company
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.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 85
Note 2 – Basis of presentation of consolidated financial statements
2.1 Financial reporting standards
The consolidated financial statements have been prepared in accordance with International Financial Reporting
Standards as adopted by the European Union (“IFRS as adopted by EU”) and interpretations issued by the IFRS
Interpretations Committee (“IFRS IC”) applicable to companies reporting under IFRS. The financial statements comply
with IFRS as issued by the International Accounting Standards Board (“IASB”) and Title 9 of Book 2 of the Dutch Civil
Code. The policies set out below have been consistently applied to all the periods and the years presented, unless
otherwise stated. The consolidated financial statements have been prepared under the historical cost convention.
Domino’s Turkey is registered in Turkey, individually maintains its accounting records in TRY and prepares its statutory
financial statements in accordance with the Turkish Financial Reporting Standards (the “TFRS”). The stand-alone
financial statements of Domino’s Turkey are based on the statutory accounting records, with adjustments and
reclassifications recorded for the purpose of fair presentation in accordance with IFRS as adopted by the EU.
Domino’s Russia is registered in the Russian Federation, individually maintains its accounting records in RUB and
prepares its statutory financial statements in accordance with the Regulations on Accounting and Reporting (“RAR”) of
the Russian Federation. The stand-alone financial statements of Domino’s Russia are based on the statutory accounting
records, with adjustments and reclassifications recorded for the purpose of fair presentation in accordance with IFRS as
adopted by the EU.
Going concern assumption
The consolidated financial statements have been prepared assuming that the Group will continue as a going
concern and be able to realise its assets and discharge its liabilities in the normal course of business. The Board
closely monitors the Group’s strategy as well as its financial and operational performance and believes that it is well
positioned to continue the growth of its profitability and store network once the COVID-19 crisis has abated.
The Group currently utilises internally generated cash flow and bank borrowings in Turkey and Russia to meet its
financing needs. The Group’s Turkish operations are well established and cash generative and act as a source of liquidity
for the wider Group. The Group’s Russian business is still in the early stages of growth and does not yet generate cash
so is funded by local bank borrowings and intra-group cash injections and loan guarantees from its Turkish subsidiary.
The Group has additional borrowing capacity available from Turkish banks, which it can draw down for liquidity needs
and to cure any potential covenant breaches with respect to its bank borrowings in Russia. In light of recent market
developments, the Group has drawn its unutilised bank lines in March 2020 in excess of its immediate needs to ensure
that the Group has sufficient available funds to cover any potential short-term reduction in cash flow resulting from the
COVID-19 outbreak. Current projections under a downside scenario based on the anticipated effects of COVID-19 known
to date indicate that the Russian and Turkish businesses and Group as a whole will meet their bank covenants in 2020
notwithstanding the fact that all such projections are subject to inherent uncertainties.
Looking ahead, 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.
2.2 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”).
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 86 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.2 Principles of consolidation continued
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:
Currency
Euros
Russian Roubles
31 Dec 2019
31 Dec 2018
Period
end
Period
average
Period
end
Period
average
6.6506 6.3484 6.0280
5.6751
0.0955 0.0872 0.0753 0.0760
2.3 New and amended international financial reporting standards
New and amended standards adopted by the Group, which are applicable for the financial statements as at
31 December 2019
A number of new or amended standards became applicable for the current reporting period and the Group has
applied the following standards and amendments for the first time for their annual reporting period commencing
1 January 2019:
• IFRS 16, ‘Leases’;
• amendments to IFRS 9, ‘Financial instruments’;
• IFRIC 23, ‘Uncertainty over income tax treatments’;
• annual improvements 2015-2017; and
• amendments to IAS 19, ‘Employee benefits’ on plan amendment, curtailment or settlement.
The amendments other than IFRS 16 are not expected to have an impact on the financial position or performance
of the Group. The impact of IFRS 16 is disclosed in Note 2.4.
The new standards, amendments and interpretations, which are issued but not effective
for the financial statements as at 31 December 2019:
• amendments to IAS 1 and IAS 8 on the definition of material;
• amendments to IFRS 9, IAS 39 and IFRS 7 – interest rate benchmark reform.
The amendments are not expected to have an impact on the financial position or performance of the Group.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 87
2.4 Impact of adoption of new standards
This note explains the impact of the adoption of IFRS 16, Leases on the Group’s financial statements and discloses the
new accounting policies that have been applied as from 1 January 2019.
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. The reclassifications and the adjustments arising from the new lease accounting rules are
therefore recognised in the opening balance sheet on 1 January 2019. New accounting policies regarding leases are
explained in Note 2.6.
Adjustments recognised on adoption of IFRS 16
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified
as ‘operating leases’ under the principles of IAS 17, Leases. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee’s incremental borrowing rate as of 1 January 2019. The weighted
average lessee’s incremental borrowing rate applied to the lease liabilities on 1 January 2019 was 23.12% for TRY, 9.7%
for RUB and 2.75% for EUR.
For leases previously classified as finance leases, the Group recognised the carrying amount of lease assets and lease
liabilities immediately before transition as the carrying amount of related property and equipment line in the financial
statements and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only
applied after that date but has not resulted in any adjustments in measurements.
Adjustments as a result of a different treatment of extension options
Adjustments as a result of different treatment of extension options are related to change in the Company’s assessment
for lease terms. With the adoption of IFRS 16, the Company has reassessed the lengths of its operating lease
commitments and decided to prolong lease terms for most of its contracts. In addition, this adjustment amount includes
extension options decided to be used for sub-leases of franchise stores.
Definition of a lease
In accordance with IFRS 16, the Group recognises a lease liability reflecting future lease payments and a ‘right-of-use
asset’ for all of its lease contracts. A contract is, or contains, a lease if the contract conveys the right to control the
use of an identified asset for a period of time in exchange for consideration. The Group assesses whether a contract
is, or contains, a lease at the inception date. The inception date is the earlier of the date of a lease agreement and the
date of commitment by the parties to the principal terms and conditions of the lease.
Sub-leases
The Group operates as intermediate lessor for a significant proportion of its leases. The Group has evaluated its rent
agreements and classified its sub-leases as financial lease as required in IFRS 16.
Where the Group recognised a leasing agreement from a sub-lease transaction, which are classified as financial leasing,
the right-of-use asset from head-lease is derecognised and a lease receivable equal to derecognised right-of-use assets
is recognised.
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:
• reliance on previous assessments on whether leases are onerous as an alternative to performing an impairment review
– there were no onerous contracts as at 1 January 2019;
• the exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application;
• the use of hindsight in determining the lease term where the contract contains options to extend or terminate the
lease; and
• accounting for leases of low-value assets (assets that cost less than USD 5,000, can be benefited on its own and not
dependent on other assets) are not included in the measurement of the lease liabilities.
The Group has also elected not to reassess whether a contract is, or contains, a lease at the date of initial application.
Instead contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and
IFRIC 4 'Determining whether an arrangement contains a lease'.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 88 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.4 Impact of adoption of new standards continued
Adjustments recognised on adoption of IFRS 16 continued
Impact on transition
The impact on transition to IFRS 16 is summarised in the table below. Accounts that were not affected by the
changes have not been included. As a result, the sub-totals and the totals disclosed cannot be recalculated from
the numbers provided.
Non-current assets
Property and equipment
Intangible assets
Right-of-use assets
Lease receivables
Current assets
Lease receivables
Non-current liabilities
Financial liabilities
Current liabilities
Financial liabilities
Total equity
31 Dec
2018
IFRS 16
impact
1 Jan
2019
136,041
48,514
—
—
136,041
48,514
—
162,446
162,446
— 44,569 44,569
—
13,857
13,857
171,276
162,879 334,155
44,330
57,993
102,323
138,449
—
138,449
Operating lease commitments disclosed as at 31 December 2018
Sub-lease liabilities recognised as at 1 January 2019
Add: extension options used
Add: previously recognised finance leases
(Less): discounting effect
Lease liability recognised as at 1 January 2019
The changes in the accounting policy affected the following items in the balance sheet on 1 January 2019:
Current lease liabilities
Non-current lease liabilities
2019
34,624
186,389
145,578
25,209
(153,463)
238,337
65,782
172,555
238,337
The associated right-of-use assets for property leases were measured at the amount equal to the lease liability, adjusted
by the amount of any prepaid or accrued lease payments relating to that lease recognised in the balance sheet as at
31 December 2018. There were no onerous lease contracts that would have required an adjustment to the right-of-use
assets at the date of initial application.
The recognised lease receivables and right-of-use assets as at 1 January 2019 are as follows:
Lease receivables
Right-of-use assets
The recognised right-of-use assets relate to the following types of assets:
Properties
Motor vehicles
Total right-of-use assets
58,426
162,446
220,872
31 Dec
2019
1 Jan
2019
166,147
145,624
14,089
16,822
180,236
162,446
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 89
(i) Impact on segment disclosures and earnings per share
Adjusted EBITDA, segment assets and segment liabilities for December 2019 have increased as a result of the change in
accounting policy.
Impact for the period
Income or loss
Revenue
Cost of sales
Gross profit
General administrative expenses
Marketing and selling expenses
Other operating income
Other operating expense
Operating profit
Foreign exchange losses
Financial income
Financial expense
Profit/(loss) before income tax
Tax expense
Income tax expense
Deferred tax income
(Loss)/profit for the period
Assets
Trade receivables
Lease receivables
Right-of-use assets
Property and equipment
Intangible assets
Goodwill
Deferred tax assets
Other non-current assets
Non-current assets
Cash and cash equivalents
Trade receivables
Lease receivables
Due from related parties
Inventories
Other current assets
Current assets
Total assets
With IFRS 16
31 Dec
2019
IFRS 16
impact
Without
IFRS 16
31 Dec
2019
980,208
— 980,208
(636,466)
9,217 (645,683)
343,742
9,217 334,525
(150,175)
3,850 (154,025)
(137,043)
— (137,043)
22,411
(522) 22,933
(7,869)
—
(7,869)
71,066
12,545
58,521
4,665
(2,174)
6,839
16,100
13,736
2,364
(85,103) (35,767) (49,336)
6,728
(11,660)
18,388
(12,344)
2,425
(14,769)
(15,318)
—
(15,318)
2,974
2,425
549
(5,616) (9,235)
3,619
With IFRS 16
31 Dec
2019
IFRS 16
impact
Without
IFRS 16
31 Dec
2019
23,422
—
23,422
39,568
39,568
180,236
180,236
—
—
160,043
—
160,043
81,424
47,133
—
—
81,424
47,133
18,060
2,559
15,501
35,903
(368)
36,271
585,789 221,995 363,794
70,928
114,493
—
—
70,928
114,493
16,618
16,618
—
70,062
—
—
—
—
70,062
65,247
(4,176) 69,423
337,348
12,442 324,906
923,137 234,437 688,700
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
90 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.4 Impact of adoption of new standards continued
Adjustments recognised on adoption of IFRS 16 continued
(i) Impact on segment disclosures and earnings per share continued
Liabilities
Financial liabilities
Lease liabilities
Long-term provisions for employee benefits
Other non-current liabilities
Non-current liabilities
Liabilities
Financial liabilities
Lease liabilities
Trade payables
Current income tax liabilities
Provisions
Other current liabilities
Current liabilities
Total liabilities
Total liabilities and equity
With IFRS 16
31 Dec
2019
IFRS 16
impact
Without
IFRS 16
31 Dec
2019
153,159
—
153,159
184,708
178,354
6,354
2,051
37,041
—
2,051
610
36,431
376,959
178,964
197,995
164,854
—
164,854
71,427
64,135
7,292
121,178
8,955
5,354
—
—
—
121,178
8,955
5,354
64,012
1,103 62,909
435,780
65,238 370,542
812,739 244,202 568,537
923,137 234,437 688,700
2.5 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.
2.6 Summary of significant accounting policies
Revenue recognition
(i) Sale of goods – wholesale
The Group sells raw materials and equipment to franchise-owned stores. Sales are recognised at a point in time when
control of the products has transferred, being when the products are delivered to the franchisees, the franchisees has
full discretion over the channel and price to sell the products, and there is no unfulfilled obligation that could affect the
franchisees’ acceptance of the products. Delivery occurs when the products have been shipped to the specific location,
the risks of obsolescence and loss have been transferred to the franchisee, and either the franchisees has accepted
the products in accordance with the sales contract, the acceptance provisions have lapsed, or the Group has objective
evidence that all criteria for acceptance have been satisfied. The financing component is only taken into consideration
when the length of the time between the transfer of services and the related consideration is expected to exceed one
year and the effect is material. The Group adjusts the promised amount of consideration for the effects of the time
value of money when the timing of payments agreed provides either the customer or the entity with a significant benefit
of financing.
(ii) Sale of goods – retail
The Group operates a chain of stores selling and delivering pizza. Revenue from the sale of goods is recognised at a
point in time when the store sells a product to the customer.
Payment of the transaction price is due immediately when the customer purchases the pizza and the pizza is delivered
to the customer.
(iii) Revenue from royalties
Royalties are calculated based on franchise-owned store sales to customers, which are recognised on the same basis as
the corporate (retail) sales by the Group. Royalties are recognised in the period the related sale occurs.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 91
(iv) Sale of goods – customer loyalty programme
The Group operates a loyalty programme where retail customers accumulate points for purchases made which entitle
them to discounts on future purchases. A contract liability for the award points is recognised at the time of the sale.
Revenue is recognised when the points are redeemed or when they expire twelve months after the initial sale.
The points provide a material right to customers that they would not receive without entering into a contract. Therefore,
the promise to provide points to the customer is a separate performance obligation. The transaction price is allocated to
the product and the points on a relative stand-alone selling price basis. Management estimates the stand-alone selling
price per point on the basis of the discount granted when the points are redeemed and on the basis of the likelihood of
redemption, based on past experience. The stand-alone selling price of the product sold is estimated on the basis of the
retail price. Other discounts are not considered as they are only given in rare circumstances.
A contract liability is recognised until the points are redeemed or expire.
(v) Revenue from franchise fees
The Group receives a franchise fee from each franchise that joins the Group and operates under the name of Domino’s
Pizza. However, the performance obligation of the Group is related to the services provided during the agreement.
These franchise fee revenues are deferred during the period of the franchise agreement and those deferred revenues
are included in the other non-current liabilities.
Franchise arrangement involves the right to operate in a specific location as well as other goods and services, such as
point-of-sale systems, restaurant concept, menus and benefits from national advertising campaigns. Revenue generated
from franchise fees are generated in proportion to time passed since the inception of the franchise contract.
In determining the transaction price, the Group adjusts the promised amount of consideration for the effects of the time
value of money if the timing of payments agreed to by the parties to the contract provides the customer or the Group
with a significant benefit of financing the transfer of goods or services to the customer. In those circumstances, the
contract contains a significant financing component.
(vi) Costs to fulfil a contract
The Group incurs certain costs with Domino’s Pizza International related to set up of each franchise contract and IT
systems used for recording of franchise revenue. The costs relate directly to the franchise contract, generate resources
used in satisfying the contract and are expected to be recovered. They are therefore capitalised as costs to fulfil a
contract and are expensed over the life of the contract.
Cash and cash equivalents
Cash and cash equivalents comprise cash balances, credit card receivables and cash at banks. Cash equivalents are
short-term, highly liquid investments that are readily convertible to known amounts of cash with original maturities of
three months or less and that are subject to an insignificant risk of change in value.
Trade receivables
Trade receivables, that are recognised by way of providing goods or services directly to a debtor, are accounted for
initially at fair value and subsequently measured at amortised cost, using the effective interest method, less allowance
for expected credit losses, if any.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables and contract assets. The allowance for expected credit losses (“ECL”) of trade
receivables is based on individual assessments of expected non-recoverable receivables as well as on expected credit
losses estimated using a provision matrix by reference to past default experience on the trade receivables.
A receivable is recognised when the goods are delivered as this is the point in time that the consideration is
unconditional because only the passage of time is required before the payment is due.
Trade and other payables
Trade payables are obligations to pay for goods and services that have been acquired in the ordinary course of business
from suppliers. Trade payables are recognised initially at fair value and subsequently measured at amortised cost. Trade
payables are classified as current liabilities if payment is due within one year or less, otherwise they are presented as
non-current liabilities.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
carried at amortised cost; any difference between the proceeds and the redemption value is recognised in the income
statement over the period of borrowing using the effective interest rate method.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 92 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.6 Summary of significant accounting policies continued
Inventories
Raw materials and trade goods are stated at the lower of cost and net realisable value. Cost comprises direct materials,
direct labour and an appropriate proportion of variable and fixed overhead expenditure, costs are assigned to individual
items of inventory on the basis of weighted average costs. Costs of purchased inventory are determined after deducting
rebates and discounts. Net realisable value is the estimated selling price in the ordinary course of business less the
estimated costs necessary to make the sale.
Financial investments
Classification and measurement
Group classified its financial assets in three categories: financial assets carried at amortised cost, financial assets
carried at fair value through profit or loss and financial assets carried at fair value through other comprehensive
income. Classification is performed in accordance with the business model determined based on the purpose of
benefits from financial assets and expected cash flows. Management performs the classification of financial assets
at the acquisition date.
Financial assets measured at amortised cost are non-derivative financial assets that are held as part of a business model
that aims to collect contractual cash flows and that have cash flows that include interest payments on principal dates
and principal balances on certain dates under contractual terms.
The Group’s financial assets which are recognised at amortised cost include, cash and cash equivalents, trade
receivables, lease receivables and other receivables. The assets are measured at their fair values in the initial recognition
of financial assets and discounted values by using the effective interest rate method in the subsequent accounting.
Gains and losses resulting from the valuation of non-derivative financial assets measured at amortised cost are
recognised in the consolidated statement of profit and loss.
Financial assets carried at amortised cost
Impairment
The Group has applied a simplified approach for the calculation of impairment on its receivables carried at amortised
cost. In accordance with this method, if no provision has been recognised on the trade receivables, lease receivables
and other receivables because of a specific event, the Group measures the expected credit loss from these receivables
by the lifetime expected credit loss. The calculation of expected credit loss is performed based on the experience of the
Group and its expectation based on the macroeconomic indications.
Financial assets carried at fair value
Assets that are held by management for collection of contractual cash flows and/or for selling the financial assets are
measured at their fair value. If management does not plan to dispose these assets in twelve months after the balance
sheet date, they are classified as non-current assets. The Group makes a choice for the equity instruments during the
initial recognition and elects profit or loss or other comprehensive income for the presentation of fair value gain and
loss. The Group has no financial assets carried at fair value in the current financial statements.
(i) Financial assets carried at fair value through profit or loss
Financial assets carried at fair value through profit or loss comprise of “derivative instruments” in the statement of
financial position. Derivative instruments are recognised as an asset when the fair value of the instrument is positive,
and as a liability when the fair value of the instrument is negative.
(ii) Financial assets carried at fair value through other comprehensive income
Financial assets carried at fair value through other comprehensive income comprise “financial assets” in the
statement of financial position. When the financial assets carried at fair value through other comprehensive income
are sold, the fair value gain or loss classified in other comprehensive income is classified to retained earnings.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) DP Eurasia N.V. Annual Report and Accounts 2019 | 93
Property and equipment
Property and equipment are carried at cost less accumulated depreciation and any impairment in value. When assets
are sold or retired, their cost and accumulated depreciation are eliminated from the related accounts and any gain or
loss resulting from their disposal is included in the income statement.
The initial cost of property and equipment comprises its purchase price, including import duties and non-refundable
purchase taxes and any directly attributable costs of bringing the asset ready for use. Expenditures incurred after the
fixed assets have been put into operation, such as repairs and maintenance, are normally charged to income statement
in the year the costs are incurred. If the asset recognition criteria are met, the expenditures are capitalised as an
additional cost of property and equipment.
Except for the construction in progress, depreciation is computed on a straight-line basis over the estimated useful
lives. The depreciation terms are as follows:
Machinery and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Useful
life (years)
3-40
3
6-10
5
The expected useful life, residual value and depreciation method are evaluated every year for the probable effects of
changes arising in the expectations and are accounted for prospectively.
Property and equipment are reviewed for impairment whenever events or changes in circumstances indicate that the
carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying
amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell
and value in use. Fair value less cost to sell is the amount obtainable from the sale of an asset less the costs of disposal.
Gains or losses on disposals or suspension of property and equipment are determined by sale revenue less net book
value and collected amount and included in the related other income or other expense accounts, as appropriate.
Intangible assets
Key money
Key money comprises payments made to former franchisees of the Group to obtain franchising rights back from them
(e.g. the area map and related rights). Key money is capitalized as long-lived assets and amortised over five years on
a straight-line basis and subject to impairment reviews. Impairment reviews for key money are undertaken if events or
changes in circumstances indicate a potential impairment.
Franchise contracts
Franchise contracts are composed of fees paid for the acquisition of the master franchise for the markets in which the
Group operates. These are carried at cost less accumulated amortisation and any impairment loss. The useful economic
lives of the assets are ten years and are amortised on a straight-line basis.
Software
Computer software, amongst others for online customer interface and financial reporting, is carried at cost less
accumulated amortisation and any impairment loss. Externally acquired computer software and software licences
are capitalised at the cost incurred to acquire and bring into use the specific software. Internally developed computer
software programmes are capitalised to the extent that costs can be separately identified and attributed to particular
software programmes, measured reliably, and that the asset developed can be shown to generate future economic
benefits. These assets are considered to have finite useful lives and are amortised on a straight-line basis over the
estimated useful economic lives of each of the assets, considered to be between three and five years. Estimated useful
lives and the amortisation method are reviewed at the end of each year and the effect of any change in the estimate is
accounted for prospectively.
Advertising, promotion and marketing costs are not capitalised and are recognised in the income statement.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
94 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.6 Summary of significant accounting policies continued
Business combinations and goodwill
A business combination is the bringing together of separate entities or businesses into one reporting entity. Business
combinations are accounted for using the acquisition method in accordance with IFRS 3.
The consideration transferred for a business combination is the fair value, at the date of exchange, of assets given,
liabilities incurred or assumed, and equity instruments issued by the acquirer, in exchange for control of the acquired
business and in addition, any costs directly attributable to the business combination. The cost of the business
combination at the date of the acquisition is adjusted if a business combination contract includes clauses that enable
adjustments to the cost of business combination depending on events after the acquisition date, and the adjustment is
measurable more probable than not. Costs of the acquisition are recognised in the related period.
Goodwill arises on the acquisition of subsidiaries and represents the excess of the consideration transferred over the
Group’s interest in net fair value of the net identifiable assets, liabilities and contingent liabilities of the acquire and the
fair value of the non-controlling interest in the acquire.
For the purpose of impairment testing, goodwill acquired in a business combination is allocated to each of the Cash
Generating Units (“CGUs"), or Group of CGUs, that is expected to benefit from the synergies of the combination.
Each unit or group of units to which the goodwill is allocated represents the lowest level within the entity at which
the goodwill is monitored for internal management purposes. Goodwill is monitored at the operating segment level.
Goodwill impairment reviews are undertaken annually or more frequently if events or changes in circumstances indicate
a potential impairment. The carrying value of goodwill is compared to the recoverable amount, which is the higher of
value in use and the fair value less costs to sell. Any impairment is recognised immediately as an expense and is not
subsequently reversed.
Goodwill is not amortised, but it is tested for impairment annually, or more frequently if events or changes in
circumstances indicate that it might be impaired and is carried at cost less accumulated impairment losses. Gains and
losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold.
Impairment of non-financial assets
The carrying values of assets are reviewed for impairment when events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. An impairment loss is recognised at the amount by which the
asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value
less costs of disposal and value in use. Value in use is the present value of estimated future cash flows expected to
arise from the use of an asset and from its disposal at the end of its useful life while the fair value less cost to sell is the
amount that will be collected from the sale of the asset less costs of disposal. Estimated future cash flows are typically
based on five-year forecasts and terminal values are considered where the asset has an indefinite useful economic
life. A cash-generating unit is the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash flows from other assets or group of assets.
Foreign currency transactions
Foreign currency transactions are translated into the functional currency using the exchange rates prevailing at the
dates of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation at period-end exchange rates of monetary assets and liabilities denominated in foreign currencies
are recognised on the income statement. Foreign exchange gains and losses related to operational activities are
classified above operating profit, whereas foreign exchange gains and losses related to financing are classified below
operating profit. See Note 2.5 regarding presentation currency.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) DP Eurasia N.V. Annual Report and Accounts 2019 | 95
Lease transactions
The Group as the lessee
The Group leases various offices, warehouses, retail stores and cars. Rental contracts are typically entered into
for fixed periods of three to five years but may have extension options as described in (i) below. Lease terms are
negotiated on an individual basis and contain a wide range of different terms and conditions. Lease agreements are
not included in net debt calculations on loan covenants, therefore do not affect the covenant ratios of the Group.
Until the 2018 financial year, leases of property, plant and equipment were classified as either finance or operating
leases. Payments made under operating leases were charged to profit or loss on a straight-line basis over the period
of the lease.
In terms of cash outflows, each lease payment is allocated between the liability and finance cost. The finance cost
is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining
balance of the liability for each period.
Lease transactions are subject to same rules as other temporary differences. The Company considers the lease as
a single transaction in which the asset and liability are integrally linked, so there is no net temporary difference at
inception. Subsequently, as differences arise on settlement of the liability and the amortisation of the leased asset,
there will be a net temporary difference on which deferred tax is recognised.
Right-of-use assets
Right-of-use assets comprising mainly of stores and vehicles are measured at cost less accumulated depreciation
and impairment losses. The right-of-use asset is initially recognised at cost comprising of:
a. amount of the initial measurement of the lease liability;
b. any lease payments made at or before the commencement date, less any lease incentives received;
c. any initial direct costs incurred by the Group; and
d. an estimate of costs to be incurred by the lessee for restoring the underlying asset to the condition required by
the terms and conditions of the lease (unless those costs are incurred to produce inventories).
The Group performs subsequent measurement for the right-of-use asset by:
a. netting-off depreciation and reducing impairment losses from the right-of-use assets; and
b. adjusting for certain remeasurements of the lease liability recognised at the present value.
Depreciation is computed on a straight-line basis over the estimated useful lives, weighing the estimated life of
the asset, future economic benefits expected and lease term of the asset and chooses the shorter of the three.
The depreciation terms are as follows:
Properties
Motor vehicles
Useful
life (years)
5
4-5
For the purpose of impairment testing, right-of-use assets are allocated to each of the stores. Each store to which
the right-of-use assets are allocated represents the lowest level within the entity at which the right-of-use assets
is monitored for internal management purposes. Right-of-use assets are monitored at the store level. Impairment
reviews for right-of-use assets are undertaken if events or changes in circumstances indicate a potential impairment.
An impairment loss is recognised at the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. Fair value less cost to sell
is the amount obtainable from the sale of an asset less the costs of disposal.
Payments associated with the leases of low-value assets are recognised on a straight-line basis as an expense in
profit or loss. There are no residual value guarantees and the initial direct costs are negligible.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
96 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.6 Summary of significant accounting policies continued
Lease transactions continued
Sub-leases
The Group operates as intermediate lessor for a significant proportion of its leases. The Group has evaluated its rent
agreements and classified its sub-leases as financial lease as required in IFRS 16.
Where the Group recognised a leasing agreement from a sub-lease transaction, classified as financial leasing, the
right-of-use asset from the head-lease is derecognised and a lease receivable equal to the derecognised right-of-use
assets is recognised.
Lease liability
The lease liability is initially measured at the present value of the lease payments that are not paid at the
commencement date. Lease liabilities are discounted using the interest rate implicit in the lease. If that rate cannot
be determined, the lessee’s incremental borrowing rate is used, being the rate that the lessee would have to pay to
borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms
and conditions.
Lease payments included in the measurement of the lease liability comprise the following:
a. fixed payments, including in-substance fixed payments;
b. variable lease payments that depend on an index or a rate, initially measured using the index or rate as
at the commencement date.
After initial recognition, the lease liability is measured:
a. increasing the carrying amount to reflect interest on the lease liability;
b. reducing the carrying amount to reflect the lease payments made; and
c. re-measuring the carrying amount to reflect any reassessment or lease modifications or to reflect revised
in-substance fixed lease payments.
(i) Extension and termination options
In determining the lease liability, the Group considers the extension and termination options. The majority of
extension and termination options held are exercisable both by the group and by the respective lessor.
Extension options are available for all contracts. In more than 90% of the contracts, DP Eurasia has the right to extend
the contract unilaterally, which does not need the consent of the landlord. Periods covered by an option to extend the
lease term are included in the lease term if the lessee is reasonably certain to exercise that option. The same rationale
applies to termination options. The term covered by a termination option is not included in the lease term if the lessee
is reasonably certain not to exercise the option. Otherwise, the lease term ends at the point in time when the lessee can
exercise the termination option.
(i) Critical judgements in determining the lease term
Lease terms are generally negotiated locally. Contracts are negotiated on an individual basis and contain a wide
range of terms and conditions, such as early termination clauses and renewal rights. Termination clauses and
renewal rights are included in several leases across the Group’s lease agreements. They are used to maximise
operational flexibility in terms of managing the assets used in the Group’s operations. In determining the lease term,
management considers all facts and circumstances that create an economic incentive to exercise a renewal right, or
not exercise a termination clause. Both options are only included in the lease term if the lease is reasonably certain to
be extended or not terminated.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) DP Eurasia N.V. Annual Report and Accounts 2019 | 97
After the commencement date, the Group reassesses the lease term for each contract if there is a significant event or
change in circumstances that is within its control and affects its ability to exercise (or not to exercise) the option to
renew. Critical judgements used in determining the lease terms are:
• the Group extends the lease term of properties' lease contracts between one and five years;
• the Group does not extend the lease term on the vehicles' lease contracts.
During the current financial year, there were no revisions related initially recognised lease liabilities.
The Group applies judgement in evaluating whether it is reasonably certain to exercise the option to renew.
That is, it considers all relevant factors that create an economic incentive for it to exercise the renewal. Factors
that are considered in terminating or renewing leases include amongst others:
• location of the store;
• leasehold improvements made with a significant remaining value; and
• costs and business disruption required to replace a leased asset.
(ii) Discount rates used
The discount rate to be used should be the interest rate implicit in the lease, if that rate can be readily determined.
This is the rate of interest that causes the present value of: (a) lease payments; and (b) the unguaranteed residual value
to equal the sum of: (i) the fair value of the underlying asset; and (ii) any initial direct costs of the lessor. However, since
the implicit rate cannot be readily determined, the incremental borrowing rate is used in calculating the present value of
lease payments during the lease terms that are not paid at that date. Incremental borrowing rate is the rate of interest
that a lessee would have to pay to borrow over a similar term, and with a similar security, the funds necessary to obtain
an asset of a similar value to the right-of-use asset in a similar economic environment.
The incremental borrowing rate is calculated separately for each operating company, based on currencies that lease
agreements are based on. The rate calculated based on a build-up approach whereby each category of leases has
an incremental borrowing rate based on the country (and currency) of the lessee and the lease term. The Group uses
recent third-party financing from banks and adjusts (if necessary) to reflect changes in financing conditions.
The discount rate is a key variable for lease liabilities and a 1% increase or decrease in the discount rate would increase
or decrease total lease payments by approximately TRY 4,055 and TRY (4,330), respectively.
(iii) Variable elements used
The variable element is the rent increase rate and is calculated based on the Consumer Price Index (“CPI”),
Producer Price Index (“PPI”) or an average of both. Variable lease payments are based on an index or a rate and are
initially measured using the index or the rate at the commencement date.
Estimation uncertainty arising from variable lease payments
The Group does not forecast future changes of the index/rate; these changes are considered when the lease
payments change. Variable lease payments that are not based on an index or a rate are not part of the lease liability,
but they are recognised in the income statement when the event or condition that triggers those payments occurs.
Nearly 90% of future lease payments for stores are linked to CPI, PPI or an average of both. Variable payment terms
are mostly used to make up for the volatile inflation rates in a country. An average of a 5% increase in the CPI and PPI
indices would increase total lease payments by approximately TRY 11,769.
Exemptions and simplifications
Payments for leases of low-value assets such as IT equipment (mainly printers, laptops and mobile phones etc.) are
not included in the measurement of the lease liabilities within the scope of IFRS 16. Lease payments of these contracts
continue to be recognised in profit or loss in the related period.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 98 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.6 Summary of significant accounting policies continued
Provisions, contingent assets and liabilities
Provisions are recognised in the consolidated financial statements when the Group has a present legal or constructive
obligation as a result of past events; it is more likely than not that an outflow of resources will be required to settle the
obligation; and the amount has been reliably estimated.
Where the effect of the time value of money is material, the amount of a provision is the present value of the
expenditures expected to be required to settle the obligation. The discount rate used to calculate the present value of
the provision should be pre-tax rate reflecting the current market assessments of the time value of money and the risks
specific to the liability. The discount rate shall not reflect risks for which future cash flow estimates have been adjusted.
A possible obligation or asset that arises from past events and whose existence will be confirmed only by the
occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group
have not been recognised in these consolidated financial statements and are treated as contingent liabilities and
contingent assets.
Volume rebate advances
Volume rebates received in advance are recognised as income within cost of sales on an accruals basis on the expected
entitlement earned up to the statement of financial position date. Up-front fees received as volume rebates are
recognised as a liability in the financial statements.
Performance bonus accruals
Realisation of the performance bonus depends on the financial and non-financial performance of the Group.
Performance bonus accrual is recognised when the Group achieved its minimum requirements and recognised
within related payroll expense accounts.
Related parties
Key management personnel, including Directors of the Company and its subsidiaries and members of the senior
leadership team, together with their families and companies controlled by or affiliated with them, are considered and
referred to as related parties. The Group has determined key management personnel as Executive Directors, members
of the Board of Directors and the leadership team. All transactions between related parties have been made considering
an arm’s length policy.
Parties are considered related to the Group if directly, or indirectly through one or more intermediaries, the party:
• is an associate of the Group;
• is a joint venture in which the Group is a venture;
• is a member of the key management personnel of the Group or its parent;
• is an entity that is controlled, jointly controlled or significantly influenced by, or for which significant voting power
in such entity resides with, directly or indirectly, any individual referred to; and
• has a post-employment benefit plan for the benefit of employees of the Group, or of an entity that is a related party
of the Group.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) DP Eurasia N.V. Annual Report and Accounts 2019 | 99
Taxes
Current and deferred tax
Taxes on income for the year comprise current tax and the change in deferred income taxes. Current year tax liability
consists of the taxes calculated over the taxable portion of the current year income by reference to corporate income
tax rates enacted as of the date of the statement of financial position and adjustments provided for the previous years’
income tax liabilities.
Deferred income tax is determined using tax rates and laws that have been enacted or substantially enacted by the
statement of financial position date and are expected to apply when the related deferred income tax asset is realised,
or the deferred income tax liability is settled.
The Group recognises 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.
Deferred income tax liabilities are recognised for all taxable temporary differences, whereas deferred income tax assets
resulting from deductible temporary differences are recognised to the extent that it is probable that future taxable
profit will be available against which the deductible temporary difference can be utilised.
Deferred income tax assets and deferred income tax liabilities related to income taxes levied by the same taxation
authority are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities.
Employment termination benefit
Provision for employment termination benefits, as required by Turkish labour law, represents the estimated
present value of the total reserve of the future probable obligation of the Group companies operating in Turkey
arising in case of the retirement of the employees, termination of employment without due cause or call for military
service. The provision is based upon actuarial estimations using the estimated liability method. Actuarial gains and
losses arising from experience adjustments and changes in actuarial assumptions are recorded to the income statement
and movements through the statement of changes in equity in the period in which they arise.
Wages, salaries, contributions to the Russian Federation state pension and social insurance funds, paid annual leave
and sick leave and bonuses are accrued in the year in which the associated services are rendered by the employees.
The Group has no legal or constructive obligation to make pension or similar benefit payments beyond the unified social
tax for its employees in its Russian operations.
Unused vacation rights
Unused vacation rights accrued in the consolidated financial statements represent the estimated total liabilities related
to employees’ unused vacation days as of the statement of financial position date.
Share-based incentives
Share-based compensation benefits are provided to members of management via various incentive plans. Information
relating to the equity-settled incentive scheme is set out in Note 22.
The fair value of options and share awards granted are recognised as a share-based payment expense with a
corresponding increase in equity. The total amount to be expensed is determined by reference to the fair value of the
awards granted:
• any market performance conditions (e.g. the entity’s share price);
• the impact of any service and non-market performance vesting conditions (e.g. remaining an employee of the Group
over a specified time).
The total expense is recognised over the vesting period, which is the period over which all of the specified vesting
conditions are to be satisfied. At the end of each period, the Group revises its estimates of the number of awards that
are expected to vest based on the non-market vesting and service conditions. It recognises the impact of the revision
to original estimates, if any, in profit or loss, with a corresponding adjustment to equity.
When options are exercised, the proceeds received net of any directly attributable transaction costs are credited to
share capital (nominal value) and share premium.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 100 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 2 – Basis of presentation of consolidated financial statements continued
2.6 Summary of significant accounting policies continued
Earnings/(loss) per share
Earnings per share disclosed in the consolidated income statement is determined by dividing net income/(loss) by
the weighted average number of shares circulating during the year concerned.
Statement of cash flows
The Group has used the indirect method to prepare the consolidated statement of cash flows. Cash flows in foreign
currencies have been translated at transaction rates.
Subsequent events
The Group adjusts the amounts recognised in the consolidated financial statements to reflect the adjusting events
after the statement of financial position date. If non-adjusting events after the statement of financial position date have
material influences on the economic decisions of users of the consolidated financial statements, they are disclosed in
the notes to the consolidated financial statements.
One-off items
Regarding the one-off policy approved by the Group management, in the presentation of the consolidated income
statement, the Group separates one-off items in order to disclose significant non-recurring items and income/expenses
which are assumed by the Group management as not part of the normal course of business.
A one-off item is a one-time cost or gain, or series of connected costs or gains, greater than TRY 300 that is
non-recurring, does not arise in the ordinary course of business, but from circumstances or events that are approved
by Group management such as:
• business combinations (including integration and restructuring costs);
• public offerings;
• litigation settlements;
• significant disposals of assets and businesses;
• other non-recurring events such as:
• share-based incentives; or
• excess pension charges such as those arising from a change in legislation and income arising from curtailments
of pension plans.
One-off items are applied on a consistent and accrual basis in the consolidated financial statements. In the presentation
of the consolidated income statement, the Group separates one-off items in order to disclose significant non-recurring
items and incomes/expenses which are assumed by the Group management as not part of the normal course of
business. The principal events which may give rise to a one-off item include the restructuring and integration of
businesses, public offerings, material litigation costs/gains, the cost of implementing a cost containment program,
income and expenses arising from significant disposals of assets and businesses, sheltered abnormal cost and other
specific income and expenses such as share-based incentives and excess pension charges. The Group discloses the
consolidated income statement in this way as it provides relevant information which is more closely aligned to how
management monitors the performance of the Group.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) DP Eurasia N.V. Annual Report and Accounts 2019 | 101
Segment reporting
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. These segments are managed
separately because they are affected by the economic conditions and geographical positions in terms of risks and returns.
IFRS 8 requires operating segments to be reported in a manner consistent with the internal reporting provided to the
chief operating decision maker. The chief operating decision maker, who is responsible for allocating resources and
assessing performance of the operating segments, has been identified as the management team, including the Chief
Executive Officer, Chief Strategy Officer and Chief Financial Officer.
The Group management assesses the performance of operating segments by the earnings before interest, tax,
depreciation and amortisation (“EBITDA”), adjusted net debt, adjusted net income and adjusted earnings per share
figures generated by adjusting the EBITDA, net debt, net income and earnings per share calculated based on the
financial statements prepared in accordance with IFRS with necessary adjustments and reclassifications. Those
adjustments and reclassifications are adding back the net effect of the time difference and foreign exchange gains and
losses generated from commercial operations in accordance with IFRS and the one-off items policy as reflected above.
EBITDA calculated based on this approach is defined as “adjusted EBITDA”. Management primarily uses the adjusted
EBITDA measure when making decisions about the Group’s activities. As EBITDA and adjusted EBITDA are non-GAAP
measures, adjusted EBITDA and adjusted operating profit measures used by other entities may not be calculated in the
same way and hence not directly comparable.
Group management assesses liquidity and levels of borrowing by net debt (total borrowings less cash and cash
equivalents) and by additionally removing the effect of long-term guarantee deposits and cash in transit not included in
the year-end cash balance to arrive at adjusted net debt”. Management primarily uses the adjusted net debt measure when
making decisions about the Group’s financing. As net debt and adjusted net debt are non-GAAP measures, adjusted net
debt measures used by other entities may not be calculated in the same way and hence not directly comparable.
2.7 Significant accounting estimates
The preparation of consolidated financial statements requires estimates and assumptions to be made regarding the
amounts for assets and liabilities at the statement of financial position date, and bases for the contingent assets and
liabilities as well as the amounts of income and expenses realised in the reporting period. The Group makes estimates
and assumptions concerning the future, which, by definition, may not equate to the related actual results. The estimates
and assumptions that may cause a material adjustment to the carrying amounts of assets and liabilities within the next
financial period are addressed below:
The areas involving significant estimates or judgements are:
• impairment tests for goodwill (Note 12);
• impairment tests for tangible assets (Note 9);
• deferred income tax assets recognition of Fidesrus (Note 20); and
• right-of-use assets, lease receivables and liabilities (Notes 2.4 and 11).
Significant judgements or estimates are disclosed in the related notes.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 102 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
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
Corporate revenue
Turkey
Russia
Other
Total
210,833 283,567
— 494,400
Franchise revenue and royalty revenue obtained from franchisees
314,772
91,440
— 406,212
Other revenue
Total revenue
– At a point in time
– Over time
Operating profit
Capital expenditures
Tangible and intangible disposals
Depreciation and amortisation expenses
Adjusted EBITDA(1)
31 December 2019
Borrowings
TRY
RUB
Lease liabilities
TRY
RUB
Total
1 January – 31 December 2018
Corporate revenue
33,729 45,867
—
79,596
559,334 420,874
— 980,208
553,396 417,732
— 971,128
5,938
3,142
—
9,080
82,664
175
(11,773) 71,066
37,171
69,597
—
106,768
(4,442) (10,608)
—
(15,050)
(50,468) (66,238)
— (116,706)
134,599 63,889
(8,691) 189,797
Turkey
Russia
Other
Total
164,800
—
— 164,800
—
153,213
—
153,213
164,800
153,213
— 318,013
93,054
—
— 93,054
—
163,081
—
163,081
93,054
163,081
— 256,135
257,854 316,294
— 574,148
Turkey
Russia
Other
Total
203,958 277,945
— 481,903
Franchise revenue and royalty revenue obtained from franchisees
257,313 43,946
— 301,259
Other revenue
Total revenue
– At a point in time
– Over time
Operating profit
Capital expenditures
Tangible and intangible disposals
Depreciation and amortisation expenses
Adjusted EBITDA
23,399
50,313
—
73,712
484,670 372,204
— 856,874
482,490 371,543
— 854,033
2,180
661
—
2,841
66,540
(3,173) (10,077) 53,290
36,797
42,213
(7,318)
(14,615)
(28,910) (24,358)
—
—
—
79,010
(21,933)
(53,268)
96,537
23,853
(9,810) 110,580
(1) Adjusted EBITDA figures for 2019 include the impact of adoption of IFRS 16, and are therefore not on a like-for-like basis with the
2018 figures.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 103
Turkey
Russia
Other
Total
24,820
—
—
173,321
24,820
173,321
2,610
—
—
14,855
2,610
14,855
—
—
—
—
—
—
24,820
173,321
198,141
2,610
14,855
17,465
27,430
188,176
— 215,606
31 December 2018
Borrowings
TRY
RUB
Lease liabilities
TRY
RUB
Total
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:
Turkey
Adjusted EBITDA(1)
Non-recurring and non-trade (income)/expenses per Group management(1)
One-off non-trading costs
Share-based incentives
EBITDA
Depreciation and amortisation
Operating profit
Russia
Adjusted EBITDA(1)
Non-recurring and non-trade (income)/expenses per Group management(1)
One-off non-trading costs
Share-based incentives
EBITDA
Depreciation and amortisation
Operating loss
Excluding
IFRS 16
impact
2019
2019
2018
134,599
108,701
96,537
131
131
1,336
1,336
191
896
133,132
107,234 95,450
(50,468)
(31,160) (28,910)
82,664
76,074 66,540
Excluding
IFRS 16
impact
2019
2019
2018
63,889
24,495
23,853
(461)
(461)
(2,063)
(2,063)
1,051
1,618
66,413
27,019
21,184
(66,238) (32,800) (24,358)
175
(5,781)
(3,174)
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
104 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 3 – Segment reporting continued
Other
Adjusted EBITDA(1)
Non-recurring and non-trade (income)/expenses per Group management(1)
One-off non-trading costs(2)
EBITDA
Depreciation and amortisation
Operating loss
Excluding
IFRS 16
impact
2019
2019
2018
(8,691)
(8,691)
(9,810)
3,082
3,082
267
(11,773)
(11,773) (10,077)
—
—
—
(11,773)
(11,773) (10,077)
(1) 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.
(2) 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:
(Loss)/profit for the period as reported
Non-recurring and non-trade (income)/expenses per Group management(1)
Share-based incentives
One-off expenses
Adjusted net (loss)/profit for the period
Excluding
IFRS 16
impact
2019
2019
2018
(5,616)
3,619
(11,093)
(727)
(727)
18
18
2,514
1,507
(6,325)
2,910
(7,072)
(1) 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
Number of employees
31 December 2018
Number of employees
Note 4 – Revenue and cost of sales
Corporate revenue
Franchise revenue and royalty revenue obtained from franchisees
Other revenue
Revenue
Cost of sales
Gross profit
Netherlands
Turkey
Russia
3
1,651
1,922
Netherlands
Turkey
3
2,286
Russia
1,816
2019
2018
494,400 481,903
406,212 301,259
79,596
73,712
980,208 856,874
(636,466) (566,250)
343,742 290,624
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 105
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:
As of 1 January
Recognised as revenue
Increases due to new franchise agreements entered
As of 31 December
Unsatisfied long-term franchisee contracts
2019
2018
28,943
21,983
(9,080)
(2,841)
13,042
9,801
32,905
28,943
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: TRY 4,374).
The amount of performance obligations relating to ongoing contracts of the Group that will be recognised 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
Employee benefit expenses
Depreciation and amortisation expenses
Note 6 – Other operating income and expenses
Other income
Marketing service income(1)
Interest income arising from sales with extended terms
Gain from sale of property and equipment
Foreign exchange gains
Other
Other expense
Legal and other provision expenses
Losses from sale of property and equipment
Foreign exchange losses
Other
Other operating income, net
(1) For 2019, the marketing income mainly includes cross-promotion income.
2019
2018
204,091
193,285
116,706
53,268
320,797 246,553
2019
9,152
4,841
2018
—
1,748
2,222
6,354
2,674
3,522
1,651
713
22,411
10,466
2019
3,783
2018
821
1,666
2,300
1,348
1,072
7,869
14,542
3,295
945
7,361
3,105
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
106 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 7 – Financial income and expenses
Foreign exchange gains/(losses)
Foreign exchange gains/(losses), net
Foreign exchange losses on lease liabilities
Financial income
Interest income on lease liabilities
Interest income
Financial expense
Interest expense
Interest expense on lease liabilities
Other
2019
6,840
(2,175)
4,665
2019
13,736
2,364
16,100
2019
42,739
35,767
6,597
85,103
2018
(18,770)
—
(18,770)
2018
—
5,508
5,508
2018
41,118
—
2,809
43,927
Note 8 – Earnings/(loss) per share
Average number of shares existing during the period
Net loss for the period attributable to equity holders of the parent
Loss per share
31 Dec
2019
31 Dec
2018
145,372,414
145,372,414
(5,616)
(0.0386)
(11,093)
(0.0763)
The reconciliation of adjusted earnings per share as of 31 December 2019 and 2018 is as follows:
Average number of shares existing during the period
Net loss for the period attributable to equity holders of the parent
Non-recurring and non-trade expenses per Group management(1)
Share-based incentives
One-off expenses
Adjusted net loss for the period attributable to equity holders of the parent
Adjusted earnings per share(1)
31 Dec
2019
31 Dec
2018
145,372,414
145,372,414
(5,616)
(11,093)
(727)
18
(6,325)
(0.04)
2,514
1,507
(7,072)
(0.05)
(1) 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 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.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 107
Note 9 – Property and equipment
Cost
Machinery and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Construction in progress
Accumulated depreciation
Machinery and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Net book value
1 Jan
2019
Additions
Disposals
Currency
translation
Transfers adjustments
31 Dec
2019
55,668
20,911
(11,553)
32,963
3,825
(13,082)
62,109
9,211
(9,544)
91,207
22,798
(13,987)
3,024
1,795
—
—
—
—
—
—
11,799
76,825
6,269
29,975
776
62,552
13,100
113,118
2,606
7,425
244,971 58,540
(48,166)
— 34,550 289,895
(17,975)
(11,120)
6,868
(18,218)
(8,290)
10,168
(27,848)
(7,271)
6,600
(44,889)
(15,319)
9,242
(108,930) (42,000) 32,878
136,041
—
—
—
—
—
(4,153) (26,380)
(3,261) (19,601)
(259) (28,778)
(4,127) (55,093)
(11,800) (129,852)
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.
Cost
Machinery and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Construction in progress
Accumulated depreciation
Machinery and equipment
Motor vehicles
Furniture and fixtures
Leasehold improvements
Net book value
1 Jan
2018
Additions
Disposals
Currency
translation
Transfers adjustments
31 Dec
2018
42,094
16,209
(10,028)
1,882
5,511
55,668
25,831
5,651
(1,283)
—
2,764
32,963
58,646
12,609
(12,069)
2,652
271
62,109
80,470
20,069
(15,169)
206
5,631
91,207
7,240
437
—
(5,260)
607
3,024
214,281
54,975
(38,549)
(520)
14,784 244,971
(11,494)
(8,167)
2,988
(10,596)
(7,953)
1,143
(26,953)
(7,087)
6,261
(36,842)
(13,812)
7,054
(85,885)
(37,019)
17,446
128,396
—
—
—
—
—
(1,302)
(17,975)
(812)
(18,218)
(69) (27,848)
(1,289) (44,889)
(3,472) (108,930)
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.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
108 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 10 – Intangible assets
Cost
Key money
Computer software
Franchise contracts
Accumulated amortisation
Key money
Computer software
Franchise contracts
Net book value
1 Jan
2019
Additions
Disposals
Currency
translation
Transfers adjustments
31 Dec
2019
17,456
29,725
(1,192)
45,573
18,503
(1,349)
48,485
—
—
111,514 48,228
(2,541)
(5,342)
(6,967)
1,193
(17,178) (10,145)
1,220
(40,480)
(4,848)
—
(63,000) (21,960)
2,413
48,514
—
—
—
—
—
—
—
—
4,633
50,622
5,945
68,672
48,485
10,578
167,779
(922) (12,038)
(2,886) (28,989)
—
(45,328)
(3,808) (86,355)
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.
Cost
Key money
Computer software
Franchise contracts
Accumulated amortisation
Key money
Computer software
Franchise contracts
Net book value
1 Jan
2018
Additions
Disposals
Currency
translation
Transfers adjustments
31 Dec
2018
8,755
9,691
(1,852)
—
862
17,456
31,502
14,344
(815)
520
22
45,573
48,485
—
—
—
— 48,485
88,742
24,035
(2,667)
520
884
111,514
(2,001)
(4,974)
1,808
(10,855)
(6,351)
(35,555)
(4,925)
28
—
(48,411) (16,250)
1,836
40,331
—
—
—
—
(175)
(5,342)
—
(17,178)
— (40,480)
(175) (63,000)
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 recognised 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.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 109
Note 11 – Right-of-use assets
Details of right-of-use assets as of 31 December 2019 and 1 January 2019 are as follows:
Right-of-use assets
Properties
Vehicles
Details of lease receivable as of 31 December 2019 and 1 January 2019 are as follows:
Lease receivables
Current
Non-current
Details of lease liabilities as of 31 December 2019 and 1 January 2019 are as follows:
Lease liabilities
Current
Non-current
31 Dec
2019
1 Jan
2019(1)
166,147
145,624
14,089
16,822
180,236
162,446
31 Dec
2019
1 Jan
2019(1)
16,618
13,857
39,568 44,569
56,186
58,426
31 Dec
2019
1 Jan
2019(1)
71,427
65,782
184,708
172,555
256,135 238,337
(1) In the previous year, the Group only recognised lease assets and lease liabilities (TRY 17,465) 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
Right-of-use assets
Properties
Vehicles
Depreciation charge of right-of-use assets
Properties
Vehicles
1 Jan
2019
Additions
Currency
translation
Disposals adjustments
31 Dec
2019
145,624
62,333
(28,334) 26,034 205,657
16,822
2,522
(1,672)
6,103
23,775
162,446 64,855 (30,006)
32,137 229,432
— (44,549)
4,653
386
(39,510)
—
—
(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.
Interest expense on lease liabilities
Properties
Vehicles
2019
2018
(18,932)
(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.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
110 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 12 – Goodwill
Movement of goodwill is as follows:
1 January
Currency translation impact
31 December
31 Dec
2019
31 Dec
2018
45,195 44,209
1,938
986
47,133
45,195
The goodwill relates to Turkish and Russian CGUs at the amounts TRY 36,023 and RUB 11,110 respectively
(31 December 2018: TRY 36,023, and RUB 9,172 respectively).
Goodwill impairment test
In accordance with IFRS and the accounting policies explained in Note 2.6, the Group performs impairment tests
on goodwill to assess whether impairment exists. The Group is obliged to test goodwill annually for impairment,
or more frequently if there are indications that goodwill might be impaired, as goodwill is deemed to have an
indefinite useful life.
In order to perform this test, management is required to compare the carrying value of the relevant cash generating unit
("CGU"), defined as stores of the Group including goodwill with its recoverable amount. The recoverable amounts of the
CGU are determined based on a value in use calculation.
The recoverable amounts of CGUs are calculated based on value in use. These calculations require estimations and use
pre-tax cash flow projections based on financial budgets approved by management covering a five-year period. Cash
flows beyond the five-year period are extrapolated using the estimated growth rates stated below. 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 all assets in CGUs, including allocated goodwill.
The Group prepares pre-tax cash flow forecasts derived from the most recent financial budgets approved by
management for the next five years and extrapolates cash flows for the remaining term based on the average
long-term growth rate of 12% for the Turkish market and 3.8% for the Russian market. The impact of IFRS 16 has been
included in the discounted cash flow models and resulted in an increase in weighted average cost of capital.
Other key assumptions applied in the impairment tests include the expected product price, demand for the products,
product cost and related expenses which are reflected in the sales growth rate for the upcoming years. Management
used sales growth projection rate 12% for Turkey and 15% for Russia respectively. Growth projections include inflation
expectations for the related CGUs. Management determined these key assumptions based on past performance and
its expectations on market development. Further, management applied pre-tax discount rates of 22% for 2019, 20% for
2018 for Turkey and 17.5% for 2019 and 17.5% for 2018 for the Russian Federation to reflect country specific Group risks.
Sensitivities – Turkish operations
The assumptions used for value in use calculations to which the recoverable amount is more sensitive are growth
rate beyond five years and pre-tax discount rate. Management determined these key assumptions based on past
performance and its expectations on market development. Further, management adopts different discount rates
each year that reflect specific risks related to the Group as discount rates. Impairment loss has not been recognised
as a result of the impairment tests performed with the above assumptions as at 31 December 2019. A further test with
a 5% adverse change to the above assumptions did not result in any impairment loss, either.
Sensitivities – Russian operations
The assumptions used for value in use calculations to which the recoverable amount is more sensitive are growth
rate beyond five years and pre-tax discount rate. Management determined these key assumptions based on past
performance and its expectations on market development.
Impairment loss has not been recognised as a result of the impairment tests performed with the above assumptions
as at 31 December 2019. A further test with a 5% adverse change to the above assumptions did not result in any
impairment loss, either.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 111
Note 13 – Cash and cash equivalents
The details of cash and cash equivalents as of 31 December 2019 and 2018 are as follows:
Cash
Banks
Term bank deposits (less than three months)
Credit card receivables(1)
(1) 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:
TRY
RUB
EUR
Other
Note 14 – Trade receivables and payables
a) Short-term trade receivables
Trade receivables
Post-dated cheques
Receivables from related parties (Note 14)
Less: doubtful trade receivable
Short-term trade receivables, net
31 Dec
2019
897
31 Dec
2018
818
16,744
16,367
42,745
—
10,542
11,259
70,928
28,444
31 Dec
2019
12,228
45,451
1,276
534
31 Dec
2018
8,914
5,425
1,638
390
59,489
16,367
31 Dec
2019
31 Dec
2018
89,419
50,903
27,154
19,148
—
20
116,573
70,071
(2,080)
(92)
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:
1 January
Current year charges
31 December
2019
92
1,988
2,080
2018
92
—
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.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
112 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 14 – Trade receivables and payables continued
b) Long-term trade receivables
Trade receivables
Post-dated cheques(1)
(1) Post-dated cheques are the receivables from franchisees resulting from store openings.
c) Short-term trade and other payables
Trade payables
Other payables
31 Dec
2019
31 Dec
2018
7,467
10,729
15,955
10,032
23,422
20,761
31 Dec
2019
31 Dec
2018
108,995
70,635
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 15 – 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
Short-term employee benefits
Share-based incentives
31 Dec
2019
31 Dec
2018
18,212
16,243
2,002
2,514
20,214
18,757
There are no loans, advance payments or guarantees given to key management.
b) Board compensation
Year ending 31 December 2019
Base salary (TRY)
Benefits (TRY)
Pension (TRY)
Annual bonus (TRY)
Long-term incentives (TRY)
Total (TRY)
Total (local currency)
Executive Directors
Non-Executive Directors
Aslan Frederieke
Slot
Saranga
Peter
Williams
Tom
Singer
Seymur
Tari
İzzet
Talu
Aksel
Sahin
2,295,945 634,840 1,083,930 502,221
171,479
146,013
— 224,733
748,086
614,971
—
—
—
—
—
—
—
—
—
—
3,830,481 1,005,586 1,083,930 502,221
₺3,830,481 €158,400 £150,000 £69,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 113
Year ending 31 December 2018
Base salary (TRY)
Benefits (TRY)
Pension (TRY)
Annual bonus (TRY)
Long-term incentives (TRY)
Total (TRY)
Total (local currency)
Notes to the table – methodology
Base salary
Executive Directors
Non-Executive Directors
Aslan Frederieke
Slot
Saranga
Peter
Williams
Tom
Singer
Seymur
Tari
İzzet
Talu
Aksel
Sahin
2,000,000 566,140 957,765 443,764
150,599
130,212
— 200,414
778,667
614,971
—
—
—
—
—
—
—
—
—
—
3,830,481 896,766 957,765 443,764
₺3,830,481 €158,400 £150,000 £69,500
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
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 45, 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 16 – Inventories
Raw materials
Other inventory
31 Dec
2019
31 Dec
2018
66,003
75,248
4,059
2,371
70,062
77,619
The cost of inventories recognised as expense and included in “cost of sales” amounted to TRY 348,080 in 2019 (2018:
TRY 269,454).
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
114 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 17 – Other receivables, assets and liabilities
Other current assets
Advance payments
Deposits for loan guarantees(1)
Lease receivables
Prepaid taxes and VAT receivable
Prepaid marketing expenses
Prepaid insurance expenses
Contract assets related to franchising contracts(2)
Other
Total
31 Dec
2019
31 Dec
2018
36,217
9,687
18,683
24,195
16,618
2,740
1,486
1,029
482
4,610
—
3,177
2,018
4,857
438
1,212
81,865 45,584
(1) In December 2019, the Group repaid a portion of its loans to Sberbank Moscow and the TRY 31,643 (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
Lease receivables
Long-term deposits for loan guarantees(1)
Prepaid marketing expenses
Contract assets related to franchising contracts(2)
Deposits given
Other
Total
31 Dec
2019
39,568
31 Dec
2018
—
21,624
8,342
8,232
7,173
4,186
3,936
1,861
5,909
—
29
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 DP International related to the set up of each franchise contract and IT systems used for
recording of franchise revenue.
Other current liabilities
Taxes and funds payable
Payable to personnel
Volume rebate advances
Unused vacation liabilities
Performance bonuses
Social security premiums payable
Advances received from franchisees
Contract liabilities from franchising contracts(1)
Other expense accruals
Total
31 Dec
2019
13,351
8,044
7,805
31 Dec
2018
6,047
6,970
942
7,523
6,404
4,961
4,109
4,057
2,908
11,254
7,408
3,588
2,243
5,727
2,791
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
Contract liabilities from franchising contracts(1)
Long term provisions for employee benefits
Other
Total
31 Dec
2019
31 Dec
2018
34,664
27,599
2,051
2,377
1,665
774
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.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 115
Note 18 – Financial liabilities
Short-term bank borrowings
Short-term financial liabilities
Short-term portions of long-term borrowings
Short-term portions of long-term leases
Current portion of long-term financial liabilities
Total short-term financial liabilities
Long-term bank borrowings
Long-term leases
Long-term financial liabilities
Total financial liabilities
The summary information of short-term and long-term bank borrowings is as follows:
31 Dec
2019
31 Dec
2018
164,800
24,820
164,800
24,820
54
71,427
11,721
7,789
71,481
19,510
236,281 44,330
153,159
161,600
184,708
9,676
337,867
171,276
574,148 215,606
31 December 2019
Currency
TRY borrowings
RUB borrowings
31 December 2018
Currency
RUB borrowings
TRY borrowings
Maturity
Interest
rate (%) Short-term Long-term
Revolving
10.88 164,800
—
2024
9.70
54
153,159
164,854
153,159
Maturity
Interest
rate (%) Short-term Long-term
2024
9.70
11,721
161,600
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:
• Domino’s Russia, which requires the ratio of financial debt to adjusted EBITDA for the relevant period should not be
more than 11;
• 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; the 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:
To be paid in one year
To be paid between one to two years
To be paid between two to three years
To be paid between three years and more
31 Dec
2019
31 Dec
2018
164,854
36,541
4,627
19,044
44,522
25,404
104,010
117,152
318,013
198,141
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
116 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 18 – Financial liabilities continued
The redemption schedule of the leases as of 31 December 2019 and 2018 is as follows:
Leases to be paid in one year
Leases to be paid between one to two years
Leases to be paid between two to three years
Leases to be paid between three years and more
The details of the finance lease liabilities as of 31 December 2019 and 2018 are as follows:
Total financial lease payments
Interest to be paid in upcoming years
As of 31 December 2019 and 2018, net financial liabilities reconciliation is as follows:
Cash and cash equivalents
Financial liabilities and leases to be paid in one year
Financial liabilities and leases to be paid in one to five years
31 Dec
2019
71,427
77,979
86,849
19,880
256,135
31 Dec
2019
—
—
—
31 Dec
2019
70,928
(236,281)
(337,867)
(503,220)
31 Dec
2019
70,928
(316,294)
(257,854)
(503,220)
(171,276)
(17,790)
79,785
—
—
31 Dec
2018
7,789
6,128
3,548
—
17,465
31 Dec
2018
25,209
(7,744)
17,465
31 Dec
2018
28,444
(44,330)
(171,276)
(187,162)
31 Dec
2018
28,444
(188,176)
(27,430)
(187,162)
Total
(215,606)
(165,233)
85,453
60,875
22,031
Short-term
financial liabilities
and leases
Long-term
financial liabilities
and leases
(44,330)
(147,443)
5,668
60,875
22,031
(88,045)
(17,311)
(27,726)
(236,281)
(211,662)
(299,707)
—
(16,924)
(337,867)
(17,311)
(44,650)
(574,148)
Cash and cash equivalents
Financial liabilities and leases – fixed rate
Financial liabilities – floating rate
31 December 2019
1 January financial liabilities
Net cash flow effect, loans received
Net cash flow effect, loans paid
Net cash flow effect, leasing payments
Interest of leases paid
Lease liability (IFRS 16)
Interest on financial liabilities
Currency translation adjustments
31 December financial liabilities
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 117
Short-term
financial liabilities
and leases
Long-term
financial liabilities
and leases
(142,152)
(48,345)
91,887
15,192
(11,122)
(1,568)
(4,159)
(23,282)
(123,549)
(85,753)
(11,503)
13,070
4,054
(3,122)
(9,904)
—
1,101
Total
(227,905)
(59,848)
104,957
19,246
(14,244)
(11,472)
(4,159)
(22,181)
(92,057)
(215,606)
31 Dec
2019
164,854
71,427
153,159
184,708
574,148
(70,928)
503,220
(34,253)
468,967
31 Dec
2018
36,541
7,789
161,600
9,676
215,606
(28,444)
187,162
(32,537)
154,625
31 December 2018
1 January financial liabilities
Net cash flow effect, loans received
Net cash flow effect, loans paid
Net cash flow effect, leasing payments
Other non-cash transaction, leasing payment
Unrealised FX gain and loss
Interest on financial liabilities
Currency translation adjustments
31 December financial liabilities
The reconciliation of adjusted net debt as of 31 December 2019 and 2018 is as follows:
Short-term bank borrowings
Short-term portions of long-term lease borrowings
Long-term bank borrowings
Long-term lease and borrowings
Total borrowings
Cash and cash equivalents (-)
Net debt
Non-recurring items per Group management
Long-term deposit for loan guarantee
Adjusted net debt(1)
(1) 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 19 – Provision
Short-term provisions
Legal provisions and other
Legal provisions are mostly resulting from labour and rent disputes.
The movement of provisions as of 31 December 2019 and 2018 is as follows:
Balance at 1 January
Provision set during the period
Paid during the period
Balance as at 31 December
31 Dec
2019
5,354
5,354
2019
1,816
3,538
—
5,354
31 Dec
2018
1,816
1,816
2018
2,116
821
(1,121)
1,816
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
118 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 20 – Commitments, contingent assets and liabilities
a) Guarantees given and received for trade receivables are as follows:
Guarantee letters given
Guarantee notes received
Guarantee letters received
31 Dec
2019
5,190
5,190
31 Dec
2019
31 Dec
2018
3,671
3,671
31 Dec
2018
39,064 34,008
14,832
23,295
53,896
57,303
Guarantee notes and letters are received as collateral for trade receivables.
b) Tax contingencies
Russian tax legislation which was enacted or substantively enacted at the end of the reporting period, is subject to
varying interpretations when being applied to the transactions and activities of the Group. Consequently, tax positions
taken by management and the formal documentation supporting the tax positions has been challenged by tax
authorities as of reporting date. Since the final outcome of the tax act is not certain, the Group has evaluated potential
scenarios and has provided a tax provision to its financial statements as of 31 December 2019 based on best estimation
and risk assessments.
The Russian transfer pricing legislation is generally aligned with the international transfer pricing principles
developed by the Organisation for Economic Co-operation and Development ("OECD") but has specific characteristics.
This legislation provides the possibility for tax authorities to make transfer pricing adjustments and impose additional
tax liabilities in respect of controlled transactions (transactions with related parties and some types of transactions with
unrelated parties), provided that the transaction price is not arm’s length.
Tax liabilities arising from transactions between companies within the Group are determined using actual transaction
prices. It is possible, with the evolution of the interpretation of the transfer pricing rules, that such transfer prices could
be challenged. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the
financial position and/or the overall operations of the Group.
The Group includes companies incorporated outside of Russia. The tax liabilities of the Group are determined on
the assumption that these companies are not subject to Russian profits tax, because they do not have a permanent
establishment in Russia. This interpretation of relevant legislation may be challenged but the impact of any such
challenge cannot be reliably estimated currently; however, it may be significant to the financial position and/or the
overall operations of the Group.
As Russian tax legislation does not provide definitive guidance in certain areas, the Group adopts, from time to time,
interpretations of such uncertain areas that reduce the overall tax rate of the Group. While management currently
estimates that the tax positions and interpretations that it has taken can probably be sustained, there is a possible
risk that an outflow of resources will be required should such tax positions and interpretations be challenged by the
tax authorities. The impact of any such challenge cannot be reliably estimated; however, it may be significant to the
financial position and/or the overall operations of the Group.
Management will vigorously defend the Group’s positions and interpretations that were applied in determining taxes
recognised in these consolidated financial statements if these are challenged by the authorities.
c) Operating lease commitments
In one year
1 – 5 years
5 – 10 years
31 Dec
2019
31 Dec
2018
—
—
—
—
16,243
17,637
744
34,624
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 119
d) Legal cases
As of 31 December 2019, the Group had three ongoing legal cases, which were opened by three franchises in Russia.
The Group does not expect any material risk in these legal cases in accordance with the opinions of its legal advisors;
therefore, it has not recognised any provision for these legal cases in the consolidated financial statements as of
31 December 2019.
Note 21 – 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 17th 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.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 120 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 21 – Tax assets, liabilities and tax expense continued
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:
Corporate tax calculated
Prepaid taxes (-)
Tax liability
Tax income and expenses included in the statement of comprehensive income are as follows:
Current period corporate tax expense
Deferred tax income/(expense)
Tax expense
The reconciliation of the tax expense in the statement of comprehensive income is as follows:
Profit before tax
Corporate tax at statutory rates (25%)
Disallowable expenses
Unrecognised tax losses
Differences in tax rates
Other, net
Total tax expense
31 Dec
2019
31 Dec
2018
15,318
11,579
(8,947)
(4,608)
6,371
6,971
2019
2018
(15,318)
(11,579)
2,974
4,385
(12,344)
(7,194)
2019
2018
6,728
(3,899)
(1,682)
975
(7,423)
(5,834)
(5,287)
(2,714)
1,646
(323)
402
702
(12,344)
(7,194)
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 121
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:
Carry forward tax losses(1)
Contract liabilities from franchising contracts
Expense accruals
Bonus accruals
Unused vacation liabilities
Legal provisions
Provision for employee termination benefit
Right-of-use assets and lease liability
Other
Property, equipment and intangible assets
Deferred income tax assets, net
(1) Consists of carry forward losses of Domino’s Russia.
Deferred income tax assets recognition of Fidesrus
31 Dec 2019
31 Dec 2018
Deferred
Temporary
differences
tax assets/ Temporary
(liabilities) differences
Deferred
tax assets/
(liabilities)
44,926
8,985
38,001
7,600
34,826
7,486
28,943
6,367
18,529
3,708
9,515
2,093
1,011
7,168
1,517
4,695
3,368
3,606
2,051
741
793
451
2,663
1,816
1,665
13,625
2,845
—
1,173
211
3,220
586
399
366
—
554
126,799
26,231
92,991
19,482
(36,642)
(8,171) (39,727)
(7,861)
(36,642)
(8,171) (39,727)
(7,861)
18,060
11,621
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 recognises 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 recognises 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-year business plan and potential growth opportunities in Russia.
Movement of the deferred tax for the years ended 31 December 2019 and 2018 are as follows:
Balance at the beginning of the year
Charged to the statement of income
Currency translation difference
Charged to other comprehensive income
Balance at the end of the year
31 Dec
2019
11,622
2,974
3,434
30
31 Dec
2018
5,929
4,746
866
81
18,060
11,622
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
122 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 22 – Share-based payments
The Phantom Option Scheme
The Phantom Option Scheme was put in place to incentivise senior members of management. The incentive plan entitles
the employees to a cash payment at the date of an exit by shareholders. The amount payable will be determined based
on the difference between the equity value of the entities at the time of exit and their grant dates. Granted options will
only vest if certain conditions are met, including continued employment with the Group, and if there is an event of a
100% exit by Fides Food Systems Coöperatief U.A. and Vision Lovemark Coöperatief U.A. However, shareholders have
the right to exercise these plans even if they do not exit 100% of their stake and may determine the amount payable to
employees pro rata their exited shareholding.
Based on this scheme, the difference between the grant equity value and the exit value of the entities have been
allocated for Pizza Restaurantları A.Ş. and Pizza Restaurants LLC separately and multiplied by the respective option
amount of each individual.
Options are granted under the plan for no consideration and carry no dividend or voting rights.
When exercised, the whole payout will be made by the ultimate shareholders of the Group in cash and any taxes, fees
or any other costs related to the incentive will be borne by employees within the incentive plan. As a result, the phantom
options are accounted for as equity-settled share-based payment awards.
The Company uses the Black-Scholes option valuation model to calculate the fair value of the Phantom Option at the
date of grant. Option pricing models require the input of highly subjective assumptions, including the expected price
volatility. The fair value at grant date is determined using an adjusted form of the Black Scholes Model that takes into
account the exercise price, the term of the option, the share price at grant date and expected price volatility of the
underlying share, the expected dividend yield, the risk free interest rate for the term of the option. The expected price
volatility is based on the historic volatility of the peer group companies. The fair value of the options is then recognized
over the vesting period of the options granted.
The fair value of the options granted in 2010, 2012 and 2015 under the Phantom Option Scheme has been estimated
using the Black-Scholes option pricing model.
• Expected average option term in years: 8.8 years
• Expected volatility: 42.6%
• Expected dividend yield: 0%
• Risk-free interest rate: 2.6%
In relation to the IPO, the shareholders used their right to partly settle the options outstanding under these plans, and
48.6% of the outstanding phantom options were settled in August 2017. As a result, this portion of the outstanding
share-based incentives is fully expensed as at 31 December 2017. The unrecognised portion of the total grant date fair
value for the remaining 51.4% of the options amounts to TRY 51 and is expensed over the remainder of the estimated
vesting period.
CEO Share Incentive Scheme
Additionally, a share incentive scheme was put in place between Fides Food Systems Coöperatief U.A., and Vision
Lovemark Coöperatief U.A. Based on performance targets and continuing employment of the CEO, the shares would
be granted each year to Vision Lovemark Coöperatief U.A.
The share incentive scheme has been terminated in December 2016. The fair value of the shares granted was
determined with reference to an EBITDA based enterprise value of the Group’s Turkish segment. The vesting period
for each grant was one year.
Russian CEO Share Incentive Scheme
According to the incentive scheme, employees were granted an option to acquire shares based on performance targets
of the Group for the upcoming years, and continuing employment until the vesting time. The shares under the option
will vest at the end of the scheme period (Note 22). On 4 June 2019, the Russian CEO terminated his employment
contract. He retained his vested awards for 2018 totalling 540,000 shares, however, the remaining unvested awards
were lapsed due to cessation of employment prior to vesting. TRY 2,729 corresponding to the unvested part of the
accrued share-based incentive has been transferred to the income statement as of 31 December 2019.
LTIP
New share incentive scheme was put in place on 7 May 2018. According to the incentive scheme employees were
granted an option to acquire shares, based on performance targets of the Group for the upcoming three years, and
continuing employment till the vesting time. The shares under the option will vest at the end of the scheme period.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) DP Eurasia N.V. Annual Report and Accounts 2019 | 123
The weighted-average fair value of the options granted under the LTIP in 2018 amounted to TRY 349 per option,
which has been estimated using the Black-Scholes option pricing model based on the following weighted-average
assumptions. Abovementioned share options are still outstanding:
• share price on the grant date: GBP 1.85;
• expected average option term in years: three years;
• expected volatility: 36.6%;
• expected dividend yield: 0%; and
• risk-free interest rate: 0.9%.
The expected volatility for each of the vesting instalments has been determined based on the annualised volatility
of historical data for a group of relevant comparator companies, measured over the expected life of the instalments.
On 8 May 2018, Aslan Saranga was granted an LTIP award amounting to 279,322 shares, 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 which will vest in May 2022 subject to achievement of an EBITDA growth target. The fair
value of the LTIP awards granted in 2019 is equal to the share price on the grant date of GBP 0.88 (2018: GBP 1.878)
since Aslan Saranga is entitled to compensation for dividends during the vesting period.
Under these two existing plans, amounting to TRY 2,002 has been charged for 2019, whereas TRY 2,514 has been
charged for 2018 and the cumulative charge is TRY 19,970 as at 31 December 2019 (31 December 2018: TRY 20,697).
Note 23 – Equity
The shareholders and the shareholding structure of the Group at 31 December 2019 and 2018 are as follows:
Fides Food Systems Coöperatief U.A.
Public shares
Vision Lovemark Coöperatief U.A.
Other
31 Dec 2019
31 Dec 2018
Share (%)
Amount
Share (%)
Amount
32.8
11,928
42.8
15,562
62.1
22,591
52.1
18,944
4.9
0.2
1,777
57
4.9
0.2
1,774
73
36,353
36,353
As of 31 December 2019, the Group’s 145,372,414 (31 December 2018: 145,372,414) shares are issued and fully paid for.
On 3 July 2017, just prior to the IPO, the Company issued (i) 13,046,726 ordinary shares, with a nominal value of EUR
0.12 each, in the capital of the Company to Vision Lovemark Coöperatief U.A. and (ii) 117,420,534 ordinary shares, with
a nominal value of EUR 0.12 each, in the capital of the Company to Fides Food Systems Coöperatief U.A., which was
paid up by debiting the Company’s share premium reserve by TRY 31,239. Also, on 3 July 2017, as part of its IPO, the
Company issued 10,372,414 new ordinary shares with a nominal value of EUR 0.12 each. As a result, the Company’s
issued and outstanding share capital increased to TRY 36,353 (divided into 145,372,414 ordinary shares). After the IPO,
52.1% of the shares became public. The net proceeds received by the Company from the IPO is TRY 94,132 (TRY 9,075
per share). DP Eurasia’s authorised share capital is EUR 60,000,000.
DP Eurasia Executive Director Aslan Saranga bought 1,000,000 shares and Non-Executive Director Peter Williams
bought 31,776 shares in 2018.
1 January
Addition
31 December
2019
2018
145,372,414
145,372,414
—
—
145,372,414
145,372,414
The nominal value of each share is EUR 0.12 (2018: EUR 0.12). There is no preference stock.
Share premium
Share premium represents the total of differences resulting from the contribution of Fides Food Systems by Fides Food
Systems Coöperatief U.A. at a price exceeding the face value of those shares and differences between the face value
and the fair value of shares issued for acquired companies and the differences between the proceeds and the nominal
value of the shares issued at the IPO.
Ultimate controlling party
The ultimate controlling party of the Company is Turkish Private Equity Fund II LP. There is no individual ultimately
controlling the Group.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
124 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 24 – Financial instruments and financial risk management
a) Capital risk management
The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern
in order to provide returns for shareholders and benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital.
To maintain or re-arrange the capital and debt structure, the Group may change the amount of dividends paid to
shareholders, return capital to shareholders, issue new shares, or sell assets.
Group management decided the capital structure by reference to the adjusted net debt by dividing the adjusted EBITDA.
Total borrowings and lease liabilities
Cash and cash equivalents (-)
Net debt
Non-recurring items per Group management
Long-term deposit for loan guarantee
Adjusted net debt
Adjusted EBITDA
Adjusted net debt/adjusted EBITDA
b) Financial risk factors
Excluding
IFRS 16
impact
31 Dec
2019
31 Dec
2019
31 Dec
2018
574,148 331,659 215,606
(70,928) (70,928) (28,444)
503,220 260,731
187,162
(34,253) (34,253) (32,537)
468,967 226,478
154,625
189,797
124,505
110,580
2.47x
1.82x
1.40x
The Group is exposed to a variety of financial risks due to its operations. These risks include credit risk, market
risk (foreign exchange risk, price risk and interest rate risk) and liquidity risk. The Group’s overall risk management
programme focuses on the unpredictability of financial markets and seeks to minimise potential adverse effects on the
Group’s financial position and performance.
b.1) Credit risk
The Group considers its maximum credit risk at 31 December 2019 to be TRY 214,037 (31 December 2018: TRY 144,007),
which is the total of the Group’s financial assets.
Credit risk is managed on a Group basis, except for credit risk relating to trade receivable and other receivable balances.
Each local entity is responsible for managing and analysing the credit risk for each of their new clients before standard
payment and delivery terms and conditions are offered. Risk control assesses the credit quality of the customer, taking
into account its financial position, past experience and other factors. Individual risk limits are set based on internal or
external ratings in accordance with limits set by the Board. It is Group policy that deposits are made with repositories of
BA2 credit rating or higher as defined by Moody’s.
The Group applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime expected
loss allowance for all trade receivables, lease receivables other receivables and contract assets. To measure the
expected credit losses, trade receivables, lease receivables other receivables and contract assets have been grouped
based on shared credit risk characteristics and the days past due. The contract assets relate to payments to Domino’s
Pizza International and have substantially the same risk characteristics as the trade receivables for the same types
of contracts. The Group has therefore concluded that the expected loss rates for trade receivables are a reasonable
approximation of the loss rates for the contract assets.
The aging of past due but not impaired financial assets is as follows:
Less than a month
One to three months
Three to six months
Over six months
Total
31 Dec
2019
31 Dec
2018
971
1,350
3,726
2,205
1,236
1,987
786
1,526
7,920
5,867
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 125
Trade receivables
Counterparties without external credit rating
Group 1
Group 2
Group 3
Total
31 Dec
2019
31 Dec
2018
26,586
17,040
114,340
73,700
2,080
92
143,006
90,832
• Group 1 – New customers (less than six months);
• Group 2 – Existing customers (more than six months) with no defaults in the past; and
• Group 3 – Existing customers (more than six months) with some defaults in the past.
b.2) Liquidity risk
The Group uses banks as well as its suppliers and shareholders as funding resources. The Group’s liquidity risk is
continuously evaluated through determining and monitoring changes in funding conditions required for achieving
the targets set in the Group’s strategy.
The Group manages its liquidity risk by monitoring expected and actual cash flows on a regular basis and by
maintaining continuity of funds, borrowings and reserves through matching the maturities of financial assets and
liabilities. The Group periodically reviews its covenant compliance and uses loans between Group companies to ensure
there is enough liquidity to carry out its operations.
As of 31 December 2019 and 2018, the liquidity risks arising from the Group’s financial liabilities consisted of the
following:
Maturities in accordance with agreements
Non-derivative financial liabilities
Borrowings
Leases
31 December 2019
Total cash
outflows in
accordance
with
contract
Carrying
value
Less
than 3
months
3-12
months
1-5
years
Over 5
years
318,013 399,379
83,027
125,994
190,358
—
256,135 318,206
30,374 69,503
184,399
33,930
Third party trade payables
121,178
121,178
121,178
—
—
—
Total
695,326 838,763 234,579
195,497 374,757
33,930
Maturities in accordance with agreements
Non-derivative financial liabilities
Borrowings
Leases
Third party trade payables
Total
31 December 2018
Total cash
outflows in
accordance
with
contract
Carrying
value
Less
than 3
months
3-12
months
1-5
years
Over 5
years
198,141 258,124
21,467
21,627
172,842
42,188
17,465
20,958
9,780
8,384
2,794
74,148
74,148
74,148
—
—
—
—
289,754 353,230
105,395
30,011
175,636
42,188
Loans from banks comprise short-term loans obtained for working capital needs and other long-term loans. The total
amount includes accrued interest and the related loans.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
126 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the consolidated financial statements continued
For the year ended 31 December 2019
Note 24 – Financial instruments and financial risk management continued
b) Financial risk factors continued
b.2) Liquidity risk continued
As of 31 December 2019, and 2018 the categories of financial instruments of the Group is as follows:
31 December 2019
Financial assets
Cash and cash equivalents
Trade receivables
Lease receivables
Other current assets
Financial liabilities
Financial liabilities
Leases
Trade and other payables
31 December 2018
Financial assets
Cash and cash equivalents
Trade receivables
Financial liabilities
Financial liabilities
Trade and other payables
b.3) Market risk
Assets and
liabilities at
amortised
Note
13
14
17
17
Loans and
cost receivables
70,928 229,402
70,928
—
—
—
—
194,101
16,618
18,683
695,326
18 318,013
18 256,135
14
121,178
—
—
—
Available
for sale
financial
assets
Financial assets or
liabilities at fair value
through profit or loss
Carrying
value
—
—
—
—
—
—
—
—
— 300,330
—
—
—
—
70,928
194,101
16,618
18,683
— 695,326
— 318,013
256,135
—
121,178
Assets and
liabilities at
amortised
cost
Note
Loans and
receivables
Available
for sale
financial
assets
Financial assets or
liabilities at fair value
through profit or loss
28,444
90,720
28,444
—
—
90,720
13
14
289,754
18 215,606
14
74,148
—
—
—
—
—
—
—
—
—
Carrying
value
119,164
28,444
—
—
— 90,720
— 289,754
— 215,606
—
74,148
The Group’s activities also expose it to market risk, including interest rate risk, foreign currency risk, and price risk.
The Group doesn’t carry any loans in currencies other than the operating company currencies on its balance sheet.
The Group manages its financial instruments centrally in accordance with the Group’s risk policies via the Treasury
Group in the Finance Department. The Group’s cash inflows and outflows are monitored on a regular basis and
compared to the monthly and yearly cash flow budgets and forecasts.
Interest rate risk
The Group is exposed to market interest rate fluctuations on its floating rate debt. Increases in benchmark interest rates
could increase the interest cost of floating rate debt and increase the cost of future borrowings. The Group’s ability to
manage interest costs also has an impact on reported results.
At 31 December 2019, interest rates were fixed on approximately 55% of the net debt for 2019 (87% for 2018).
The average interest rate on short-term borrowings in 2019 was 10.29% (2018: 17.21%).
The financial instruments of the Group which are sensitive to interest rates are stated in the following table:
Financial instruments with floating interest
Financial liabilities
Financial instruments with fixed interest
Financial liabilities – repricing dates
– six months or less
– six to twelve months
– one to five years
31 Dec
2019
31 Dec
2018
257,854
27,430
316,294
188,176
—
—
41,907
19,510
274,387
168,666
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 127
Assuming that all other variables remain constant, a 1.0 percentage point increase in floating interest rates on a full-year
basis as at 31 December 2019 would have led to an additional TRY 2,331 finance costs (2018: TRY 248 additional finance
costs). A 1.0 percentage point decrease in floating interest rates on a full-year basis would have an equal but
opposite effect.
The Group’s objective is to minimise net interest cost and balance the amounts of debt at fixed and floating rates over
time. The majority of the debt has interest charged at a fixed rate. This limits the impact that changes to floating rates
have on the Group’s finance expenses.
Foreign currency risk
The Group is operating in multiple countries and is subject to the risk that changes in foreign currency values
impact the value of the Group’s sales, purchases, assets and borrowings. At 31 December 2019, the exposure to the
Group from companies holding assets and liabilities other than in their functional currency amounted to TRY 17,685
(31 December 2018: TRY 35,150).
As an estimation of the approximate impact of the residual risk, with respect to financial instruments, the Group has
calculated the impact of a 20% change in exchange rates.
Impact on income statement
A 20% strengthening of the Euro against key currencies to which the Group is exposed would have led to approximately
an additional TRY 3,537 gain in the income statement (2018: TRY 7,030 loss).
A 20% weakening of the Euro against these currencies would have led to an equal but opposite effect.
Price risk
As of 31 December 2019, the Group does not have financial instruments classified as available for sale, or fair value
through profit and loss, which are exposed to market price fluctuations. Price risk does arise from an increase in
commodity prices. This price risk is managed locally where advanced purchases of raw materials are made to achieve
lower prices and bulk purchases are made to achieve discounts from suppliers.
Note 25 – 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.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.) 128 | DP Eurasia N.V. Annual Report and Accounts 2019
Company income statement
For the years ended 31 December 2019 and 2018
Income statement
General administrative expenses
Operating profit
Foreign exchange (losses)
Financial income
Net income/(loss) from subsidiaries
Loss before income tax
Tax expense
Loss for the year
Notes
2019
2018
6
2
(11,773)
(11,773)
(214)
1,876
4,495
(5,616)
—
(5,616)
(10,079)
(10,079)
(68)
1,242
(2,188)
(11,093)
—
(11,093)
The accompanying notes form an integral part of these financial statements.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 129
Company balance sheet
As at 31 December 2019 (before appropriation of profit)
Assets
Subsidiaries
Non-current assets
Cash and cash equivalents
Due from related parties
Other current assets
Current assets
Total assets
Liabilities
Accounts payable
Due to related parties
Other current liabilities
Current liabilities
Total liabilities
Equity
Paid in share capital
Share premium
Other legal reserves
Retained earnings
Result for the year
Total equity
Total liabilities
Notes
2
3
4
5
31 Dec
2019
51,604
51,604
710
60,530
192
61,432
113,036
2,129
228
281
2,638
2,638
36,353
139,256
(22,288)
(37,307)
(5,616)
110,398
113,036
31 Dec
2018
75,557
75,557
1,115
65,219
—
66,334
141,891
1,406
918
1,118
3,442
3,442
36,353
139,983
(687)
(26,107)
(11,093)
138,449
141,891
The accompanying notes form an integral part of these financial statements.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
130 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the Company financial statements
For the year ended 31 December 2019
Note 1 – Basis of presentation of statutory financial statements
1.1 Basis of preparation
The Company financial statements of DP Eurasia N.V. (hereafter: the Company) have been prepared in accordance
with Part 9, Book 2 of the Dutch Civil Code. In accordance with sub 8 of article 362, Book 2 of the Dutch Civil Code,
the Company’s financial statements are prepared based on the accounting principles of recognition, measurement
and determination of profit, as applied in the consolidated financial statements. These principles also include the
classification and presentation of financial instruments, being equity instruments or financial liabilities.
The Company has prepared its Annual Report in accordance with EU-directives as implemented in Part 9, Book 2 of
the Dutch Civil Code and the firm pronouncements in the Guidelines for Annual Reporting in the Netherlands as issued
by the Dutch Accounting Standards Board for the year ended 31 December 2019.
In case no other policies are mentioned, refer to the accounting policies as described in the accounting policies in
the consolidated financial statements of this Annual Report. For an appropriate interpretation, the Company financial
statements of DP Eurasia N.V. should be read in conjunction with the consolidated financial statements.
The Company is registered with the trade register of the Chamber of Commerce in the Netherlands under the
number 67090753.
The Company prepared its consolidated financial statements in accordance with International Financial Reporting
Standards (“IFRS") as adopted by the European Union.
The remuneration paragraph is included in the remuneration section of the consolidated financial statements.
1.2 Summary of significant accounting policies
Investments in consolidated subsidiaries
Consolidated subsidiaries are all entities (including intermediate subsidiaries) over which the Company has control.
The Company controls an entity when it is exposed, or has rights, to variable returns from its involvement with the
subsidiary and has the ability to affect those returns through its power over the subsidiary. Subsidiaries are recognised
from the date on which control is transferred to the Company or its intermediate holding entities. They are derecognised
from the date that control ceases. Investments in consolidated subsidiaries are measured at net asset value. Net asset
value is based on the measurement of assets, provisions and liabilities and determination of profit based on the
principles applied in the consolidated financial statements.
The Company applies the acquisition method to account for acquiring subsidiaries, consistent with the approach
identified in the consolidated financial statements. The consideration transferred for the acquisition of a subsidiary is
the fair value of assets transferred by the Company, liabilities incurred to the former owners of the acquiree and the
equity interests issued by the Company. The consideration transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and contingent
liabilities assumed in an acquisition are measured initially at their fair values at the acquisition date, and are subsumed
in the net asset value of the investment in consolidated subsidiaries. Acquisition-related costs are expensed as incurred.
Note 2 – Subsidiaries
The movement schedule for the investment in subsidiaries as of 31 December 2019 and 2018 is as follows:
1 January 2018
Net loss from subsidiaries
Currency translation difference
Remeasurement of post-employment benefit obligations
Share-based incentive plans
1 January 2019
Net income from subsidiaries
Currency translation difference
Remeasurement of post-employment benefit obligations
Share-based incentive plans
Cancellation of share-based incentive plans
31 December 2019
82,829
(2,188)
(7,307)
(291)
2,514
75,557
4,495
(27,614)
(107)
2,002
(2,729)
51,604
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 131
Note 3 – Cash and cash equivalents
The details of cash and cash equivalents as of 31 December 2019 and 2018 are as follows:
Cash
Euro
Note 4 – Due from related parties
The details of due from related parties as of 31 December 2019 and 2018 are as follows:
Pizza Restaurants LLC(1)
Pizza Restaurantları A.Ş.(1)
Fidesrus B.V.
Fides Food Systems B.V.
31 Dec
2019
710
710
31 Dec
2019
710
710
31 Dec
2018
1,115
1,115
31 Dec
2018
1,115
1,115
31 Dec
2019
31 Dec
2018
41,682
37,082
18,696
28,137
82
70
—
—
60,530
65,219
(1) There is an average 4.5% interest increase on the Pizza Restaurants LLC balance and a 4.8% interest increase on the
Pizza Restaurantları A.Ş. balance.
Note 5 – Equity
The movements in shareholders’ equity are as follows:
Share
capital
Share
premium
Currency
translation
reserves
Retained Result for
the year
earnings
Total
equity
Balances at 1 January 2018
36,353
137,469
(10,993) (25,908)
92
137,013
Remeasurements of post-employment benefit obligations, net
Appropriation of the result preceding year
Currency translation adjustments
Share-based incentive plans
Total loss for the year
Balances at 31 December 2018
Remeasurements of post-employment benefit obligations, net
Appropriation of the result preceding year
Currency translation adjustments
Share-based incentive plans
Cancellation of share-based incentive plans
Total loss for the year
Balances at 31 December 2019
—
—
—
—
—
—
—
—
—
—
10,306
2,514
—
—
—
(291)
—
(291)
92
—
—
—
(92)
—
—
—
10,306
2,514
(11,093)
(11,093)
36,353
139,983
(687) (26,107)
(11,093) 138,449
—
—
—
—
—
—
—
—
—
—
—
(21,601)
2,002
(2,729)
—
—
—
—
(107)
—
(107)
(11,093)
11,093
—
—
—
—
—
—
—
—
(21,601)
2,002
(2,729)
(5,616)
(5,616)
36,353
139,256
(22,288) (37,307)
(5,616) 110,398
The Group has no dividend payment to the Company as of 31 December 2019 (31.12.2018: none).
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
132 | DP Eurasia N.V. Annual Report and Accounts 2019
Notes to the Company financial statements continued
For the year ended 31 December 2019
Note 5 – Equity continued
The shareholders and the shareholding structure of the Company at 31 December 2019 and 2018 are as follows:
Fides Food Systems Coöperatief U.A.
Public shares
Vision Lovemark Coöperatief U.A.
Other
31 Dec 2019
31 Dec 2018
Share (%)
Amount
Share (%)
Amount
32.8
11,928
42.8
15,562
62.1
22,591
52.1
18,944
4.9
0.2
1,777
57
4.9
0.2
1,774
73
36,353
36,353
As of 31 December 2019, the Company’s 145,372,414 (31 December 2018: 145,372,414) shares are issued and fully paid for.
On 3 July 2017, just prior to IPO, the Company issued (i) 13,046,726 ordinary shares, with a nominal value of EUR 0.12
each, in the capital of the Company to Vision Lovemark Coöperatief U.A. and (ii) 117,420,534 ordinary shares, with a
nominal value of EUR 0.12 each, in the capital of the Company to Fides Food Systems Coöperatief U.A., which was
paid up by debiting the Company’s share premium reserve by TRY 31,239. Also, on 3 July 2017, as part of its IPO, the
Company issued 10,372,414 new ordinary shares with a nominal value of EUR 0.12 each. As a result, the Company’s
issued and outstanding share capital, increased to TRY 36,353 (divided into 145,372,414 ordinary shares). After the
IPO, 52.1% of the shares became public.
1 January
Addition
31 December
2019
2018
145,372,414
145,372,414
—
—
145,372,414
145,372,414
The nominal value of each share is EUR 0.12 (2018: EUR 0.12). There is no preference stock.
Share premium
Share premium represents the total of differences resulting from the contribution of Fides Food Systems by Fides Food
Systems Coöperatief U.A. at a price exceeding the face value of those shares and differences between the face value
and the fair value of shares issued for acquired companies and the differences between the proceeds and the nominal
value of the shares issued at the IPO.
Retained earnings
The Board determined the result over 2018 as follows:
Retained earnings
Net result for the period
Note 6 – General administrative expenses
IPO costs
Personnel expenses
Consultancy expenses
Miscellaneous expenses(1)
Management expenses
Other
Total
2018
(11,093)
(11,093)
2019
3,082
2018
267
2,850
2,302
2,191
2,840
2,797
2,307
225
628
582
1,781
11,773
10,079
(1) Miscellaneous expenses mainly includes the travel, accommodation and other expenses of Domino’s Turkey personnel.
(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
DP Eurasia N.V. Annual Report and Accounts 2019 | 133
Note 7 – Audit fees
For the year ended 31 Dec 2019
Audit of financial statements
Other audit service s
Total audit services
Tax services
Other non-audit services
Total
PwC NL
Other PwC
network
Total PwC
network
547
171
718
—
—
—
729
230
959
—
—
—
1,276
401
1,677
—
—
—
The fees listed above relate to the procedures applied to the Company and its consolidated Group entities by accounting
firms and external auditors as referred to in article 1(1) of the Dutch Accounting Firms Oversight Act (Dutch acronym:
"Wta") as well as by Dutch and foreign-based accounting firms, including their tax services and advisory groups.
These fees relate to the audit of the 2019 financial statements, regardless of whether the work was performed during
the financial year.
For the year ended 31 Dec 2018
Audit of financial statements
Other audit service s
Total audit services
Tax services
Other non-audit services
Total
PwC NL
Other PwC
network
Total PwC
network
633
90
723
—
—
—
732
56
788
—
—
—
1,365
146
1,511
—
—
—
Note 8 – Employees
During 2019, the average number of employees, based on full-time equivalents, was three (2018: three).
Of these, two employees are working outside of the Netherlands.
Note 9 – Commitments and contingencies not included in the balance sheet
Tax group liability
The Company is the parent of the Group’s fiscal unity in the Netherlands, and is therefore liable for the liabilities of said
fiscal unity as a whole. The fiscal unity consists of DP Eurasia N.V., Fidesrus B.V. and Fides Food Systems B.V.
Other information
Proposal for profit allocation
With due observance of Dutch law and the articles of association, it is proposed that the net loss of TRY (5,616) is
deducted from the retained earnings. Furthermore, with due observance of article 43, paragraph 7, it is proposed that
no dividend payment will be paid over 2019.
Financial statements(Amounts expressed in thousands of Turkish Lira (TRY) unless otherwise stated.)
134 | DP Eurasia N.V. Annual Report and Accounts 2019
Independent auditor’s report
To: the general meeting and Board of Directors of DP Eurasia N.V.
Report on the financial statements 2019
Our opinion
In our opinion:
• the consolidated financial statements of DP Eurasia N.V. together with its subsidiaries (‘the Group’) give a true and
fair view of the financial position of the Group as at 31 December 2019 and of its result and cash flows for the year
then ended in accordance with International Financial Reporting Standards as adopted by the European Union
(EU-IFRS) and with Part 9 of Book 2 of the Dutch Civil Code;
• the Company financial statements of DP Eurasia N.V. (‘the Company’) give a true and fair view of the financial position
of the Company as at 31 December 2019 and of its result for the year then ended in accordance with Part 9 of Book 2
of the Dutch Civil Code.
What we have audited
We have audited the accompanying financial statements 2019 of DP Eurasia N.V., Amsterdam. The financial statements
include the consolidated financial statements of the Group and the Company financial statements.
The consolidated financial statements comprise:
• the consolidated statement of financial position as at 31 December 2019;
• the following consolidated statements for 2019: the statements of comprehensive income, changes in equity and cash
flows; and
• the notes, comprising significant accounting policies and other explanatory information.
The Company financial statements comprise:
• the Company balance sheet as at 31 December 2019;
• the Company income statement for the year then ended;
• the notes, comprising the accounting policies applied and other explanatory information.
The financial reporting framework applied in the preparation of the financial statements is EU-IFRS and the relevant
provisions of Part 9 of Book 2 of the Dutch Civil Code for the consolidated financial statements and Part 9 of Book 2 of
the Dutch Civil Code for the Company financial statements.
Material uncertainty related to going concern
We draw attention to the going concern paragraph in Note 2.1 of the consolidated financial statements. This note
indicates that the Group faces uncertainties following the COVID-19 virus outbreak that might negatively impact its
business operations and financial performance. 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. Our opinion is not modified in
respect of this matter.
The basis for our opinion
We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. We have further
described our responsibilities under those standards in the section ‘Our responsibilities for the audit of the financial
statements’ of our report.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Independence
We are independent of DP Eurasia N.V. in accordance with the European Union Regulation on specific requirements
regarding statutory audit of public-interest entities, the ‘Wet toezicht accountantsorganisaties’ (Wta, Audit firms
supervision act), the ‘Verordening inzake de onafhankelijkheid van accountants bij assuranceopdrachten’ (ViO, Code
of Ethics for Professional Accountants, a regulation with respect to independence) and other relevant independence
requirements in the Netherlands. Furthermore, we have complied with the ‘Verordening gedrags- en beroepsregels
accountants’ (VGBA, Dutch Code of Ethics).
DP Eurasia N.V. Annual Report and Accounts 2019 | 135
Our audit approach
Overview and context
DP Eurasia N.V. is a public limited Company, having its statutory seat in Amsterdam, the Netherlands. The principal
activity of the Company consists of acting as an investment company. The Company and its subsidiaries operate
Company owned stores in Turkey, the Russian Federation, Azerbaijan and Georgia. Furthermore, the Group provides
technical support and consultancy services to franchise-owned stores in these regions. The Group is comprised
of several components and therefore we considered our Group audit scope and approach as set out in the section
‘The scope of our Group audit’. We paid specific attention to the areas of focus driven by the operations of the Group,
as set out below.
As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the
financial statements. In particular, we considered where the Board of Directors made important judgements, for
example, in respect of significant accounting estimates that involved making assumptions and considering future
events that are inherently uncertain. In paragraph 2.7 of the financial statements the Company describes the areas
of judgement in applying accounting policies and the key sources of estimation uncertainty. Given the significant
estimation uncertainty and the related higher inherent risks of material misstatement in the recoverability of deferred
tax assets at Pizza Restaurants LLC (“Domino’s Russia”) and the goodwill impairment assessment, we considered these
matters as key audit matters as set out in the section ‘Key audit matters’ of this report.
Furthermore, we considered adoption of IFRS 16 ‘Leases’ as a key audit matter considering the changed accounting and
increased complexity resulting from the IFRS 16 implementation. Other areas of focus, that were not considered as key
audit matters were revenue recognition from corporate stores, share-based payments, collectability of receivables, debt
covenant compliance at Domino’s Russia and valuation of inventory.
We ensured that the audit teams both at Group and at component level included the appropriate skills and competences
that are needed for the audit of a Group operating in the retail and consumer industry. We therefore included specialists
in the areas of IT audit and income tax and experts in the areas of valuations and share-based payments in our team.
The outline of our audit approach was as follows:
Materiality
• Overall materiality: TRY 9.8 million
Materiality
Audit scope
Audit
scope
Key audit
matters
• We conducted audit work in Turkey, Russia and the Netherlands.
• Site visits were conducted to Turkey and Russia.
• Audit coverage: 100% of consolidated revenue, 100% of consolidated total assets and
99% of consolidated profit before tax.
Key audit matters
• Recoverability of deferred tax assets at Pizza Restaurants LLC (“Domino’s Russia”)
• Goodwill impairment assessment
• Adoption of IFRS 16 ‘Leases’
Other information
136 | DP Eurasia N.V. Annual Report and Accounts 2019
Independent auditor’s report continued
To: the general meeting and Board of Directors of DP Eurasia N.V.
Materiality
The scope of our audit is influenced by the application of materiality, which is further explained in the section
‘Our responsibilities for the audit of the financial statements’.
Based on our professional judgement we determined certain quantitative thresholds for materiality, including the
overall materiality for the financial statements as a whole as set out in the table below. These, together with qualitative
considerations, helped us to determine the nature, timing and extent of our audit procedures on the individual financial
statement line items and disclosures and to evaluate the effect of identified misstatements, both individually and in
aggregate, on the financial statements as a whole and on our opinion.
Overall Group materiality
TRY 9.8 million (2018: TRY 8.5 million).
Basis for determining materiality
We used our professional judgement to determine overall materiality.
As a basis for our judgement, we used 1% of revenues.
Rationale for benchmark applied
Component materiality
We used total revenues as the primary benchmark, based on our analysis
of the common information needs of users of the financial statements.
We believe that total revenues is an important metric for the financial
performance of the Group. Although we believe that the profit of the business
is one of the ultimate key performance measures, at this stage of expansion
through foreign markets, the key stakeholders are focused on the entity's
growth in revenue. After evaluating alternative benchmarks together with
the generally accepted benchmark of profit before tax, we believe that total
revenue is an appropriate benchmark.
To each component in our audit scope, we, based on our judgement,
allocate materiality that is less than our overall Group materiality. The range
of materiality allocated across components was between TRY 9.8 million
and TRY 7.5 million.
We also take misstatements and/or possible misstatements into account that, in our judgement, are material for
qualitative reasons.
We agreed with the Audit Committee that we would report to them misstatements identified during our audit above
TRY 467 thousand (2018: TRY 400 thousand) as well as misstatements below that amount that, in our view, warranted
reporting for qualitative reasons.
DP Eurasia N.V. Annual Report and Accounts 2019 | 137
The scope of our Group audit
DP Eurasia N.V. is the parent company of a Group of entities. The financial information of this Group is included in the
consolidated financial statements of DP Eurasia N.V.
We tailored the scope of our audit to ensure that we performed sufficient work to be able to give an opinion on the
financial statements as a whole, taking into account the management structure of the Group, the nature of operations
of its components, the accounting processes and controls, and the markets in which the components of the Group
operate. In establishing the overall Group audit strategy and plan, we determined the type of work required to be
performed at component level by the Group engagement team and by each component auditor.
The Group audit primarily focused on the significant components: Pizza Restaurantları A.Ş. (“Domino’s Turkey”) and
Pizza Restaurants LLC (“Domino’s Russia”), and these were subjected to audits of their complete financial information,
as those components are individually financially significant to the Group. Additionally, we selected one component, the
DP Eurasia N.V. stand-alone entity, for audit procedures to achieve appropriate coverage on financial line items in the
consolidated financial statements.
In total, in performing these procedures, we achieved the following coverage on the financial line items:
Revenue
Total assets
Profit before tax
100%
100%
99%
For Group entities DP Eurasia N.V. and Domino’s Turkey the Group engagement team performed the audit work in the
Netherlands and Turkey. For Domino’s Russia, we used a component auditor who is familiar with the local laws and
regulations to perform the audit work. Where the component auditor performed the work, we determined the level of
involvement we needed to have in their audit work to be able to conclude whether sufficient appropriate audit evidence
had been obtained as a basis for our opinion on the consolidated financial statements as a whole.
We issued instructions to the Domino’s Russia component team. These instructions included among others our risk
analysis, materiality and scope of the work. We explained to the component audit team the structure of the Group,
the main developments that are relevant for the component auditor, the risks identified, the materiality levels to be
applied and our Group audit approach. We had calls with the component audit team and visited the team and local
management twice, during the audit as well as upon completion of their audit work. During these calls and visits,
we discussed the significant accounting and audit issues identified by the component auditor, the reports of the
component auditor, the findings of their procedures and other matters, which could be of relevance for the consolidated
financial statements. We reviewed selected working papers during our visits.
The financial statement disclosures and a number of complex items were audited by the Group engagement team
at the head office. These include, share based payments, the adoption of the accounting standard IFRS 16 as well as
compliance with Dutch law disclosure requirements.
By performing the procedures above at components, combined with additional procedures at Group level, we have
been able to obtain sufficient and appropriate audit evidence on the Group’s financial information, as a whole, to
provide a basis for our opinion on the financial statements.
Other information 138 | DP Eurasia N.V. Annual Report and Accounts 2019
Independent auditor’s report continued
To: the general meeting and Board of Directors of DP Eurasia N.V.
Our focus on the risk of fraud
Our objectives
We assess and respond to the risk of fraud in the context of our audit of the financial statements. In this context and
with reference to the sections on responsibilities in this report, our objectives in relation to fraud are:
• to identify and assess the risks of material misstatement of the financial statements due to fraud;
• to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud,
through designing and implementing appropriate audit responses; and
• to respond appropriately to fraud or suspected fraud identified during the audit.
However, because of the characteristics of fraud, particularly those involving sophisticated and carefully organised
schemes to conceal it, such as forgery, deliberate failure to record transactions and collusion, our audit might not detect
instances of material fraud.
Our risk assessment
We obtained an understanding of the entity and its environment, including the entity’s internal controls. We made
enquiries of internal audit, the Audit Committee and the Board of Directors. In addition, we considered other external
and internal information. As part of our process of identifying fraud risks, we evaluated fraud risk factors with respect
to financial reporting fraud, misappropriation of assets and bribery and corruption. Fraud risk factors are events or
conditions, which indicate an incentive or pressure, an opportunity, or an attitude or rationalisation to commit fraud. We
evaluated the fraud risk factors to consider whether those factors indicated a risk of material misstatement due to fraud.
As in all of our audits, we addressed the risk of management override of internal controls, including evaluating whether
there was evidence of bias by the Board of Directors that may represent a risk of material misstatement due to fraud.
Given the territories the Group operates in, we considered the risk of bribery and corruption taking into account the
corruption perception index of the countries of operation and updated our understanding of the internal controls that
the Group has in place to address and manage this risk. We additionally performed background checks on a sample of
supplier relationships.
Our response to the risk of fraud
We evaluated the design and the implementation and, where considered appropriate, tested the operating effectiveness
of internal controls that mitigate fraud risks. In addition, we performed procedures, which include journal entry testing
and evaluating accounting estimates for bias.
In particular, our procedures consisted of data analysis of high-risk journal entries, assessment of whistleblower hotline
process, evaluation of key estimates and judgements made by DP Eurasia (including retrospective reviews of prior
year’s estimates against actual outcomes) and testing the classification and capitalization of expenses. Where we
identified instances of unexpected journal entries or other risks through our data analytics, we performed additional
audit procedures to address each identified risk. These procedures also included testing of transactions back to source
information. We also incorporated an element of unpredictability in our audit.
We considered the outcome of our other audit procedures and evaluated whether any findings or misstatements were
indicative of fraud. If so, we re-evaluate our assessment of fraud risk and its resulting impact on our audit procedures.
We refer to the key audit matters in the next paragraph of this report, which are all examples of our approach related to
areas of higher risk due to accounting estimates where management makes significant judgements.
DP Eurasia N.V. Annual Report and Accounts 2019 | 139
Key audit matters
Key audit matters are those matters that, in our professional judgement, were of most significance in the audit of the
financial statements. We have communicated the key audit matters to the Board of Directors. The key audit matters are
not a comprehensive reflection of all matters identified by our audit and that we discussed. In this section, we described
the key audit matters and included a summary of the audit procedures we performed on those matters.
We addressed the key audit matters in the context of our audit of the financial statements as a whole, and in forming
our opinion thereon. We do not provide separate opinions on these matters or on specific elements of the financial
statements. Any comment or observation we made on the results of our procedures should be read in this context.
Compared to prior year we excluded one key audit matter, being the adoption of franchisee contract fee revenue
recognition as last year was the adoption year for IFRS 15 ‘Revenue from contracts with customers’ and the transition
has been completed. Additionally, we identified one new key audit matter relating to adoption of IFRS 16 ‘Leases’.
Key audit matter
Our audit work and observations
Recoverability of deferred tax assets at
Pizza Restaurants LLC (“Domino’s Russia”)
The Group describes its accounting policies
concerning deferred tax assets recognition within
Note 2.6 under “Taxes” and provides details
on deferred tax positions and accumulated tax
losses within Note 21, section “Deferred income
tax assets recognition of Fidesrus”, to the
consolidated financial statements.
As of 31 December 2019, Domino’s Russia has carry
forward tax losses amounting to TRY 48 million,
which relate to the years 2014 to 2018.
Management considers that, despite the losses
incurred over past years, there is sufficient
convincing evidence that the Company will be able
to earn taxable profits in the near future, which can
be used to offset the carry forward tax losses. In
reaching this conclusion, management considered
the approved budgets, their track record in meeting
the budgets, its expansion strategy with own
stores as well as franchise-owned stores and the
improved results in Russia as disclosed in Note 3
‘Segment reporting’. Based on the expected taxable
income and considering the related and inherent
risk of uncertainty related to future taxable profits,
Domino’s Russia’s recognition of deferred tax assets
amounts to TRY 9 million (2018: TRY 8 million).
Due to the inherent level of uncertainty, the potential
limitations in the recoverability of deferred tax assets
and the significant management’s judgement involved,
we considered this a key audit matter for our audit.
Management provided us with a breakdown of the historic
losses by year and the composition of the carry-forward
deferred tax assets relating to tax losses.
With the support from our income tax specialists,
we evaluated and tested corporate income tax positions
taken by management and coordinated local tax issues.
We examined supporting documentation of the deferred tax
assets and assessed the recoverability through agreeing the
forecasted future taxable profits with the approved business
plan. We assessed whether management’s five years
business plan and potential growth opportunities used in the
forecasts were consistent with those used in the impairment
tests, including the goodwill impairment assessment and
found no inconsistencies.
We have challenged the underlying assumptions forecasted
revenues and costs, ascertained inclusion of all required
elements in the forecasts and recalculated taxable profits
based on the applicable tax rates in Russia. We also
assessed the past performance and current year results
against previous business plans used by Domino’s Russia
to determine the future taxable income.
With the procedures performed above, we determined
that the methodologies and assumptions used by the
Group to assess recoverability of deferred tax assets as
at 31 December 2019 are reasonable.
Other information 140 | DP Eurasia N.V. Annual Report and Accounts 2019
Independent auditor’s report continued
To: the general meeting and Board of Directors of DP Eurasia N.V.
Key audit matters continued
Key audit matter
Our audit work and observations
We evaluated and challenged the composition of
management’s future cash flow forecasts, the process
by which they were drawn up, and the consistency with
the Board of Directors' approved budgets.
We compared the current year actual results with the 2019
figures as included in the prior year forecast and concluded
that the forecasts included assumptions that, with hindsight,
had been realistic. With the support of our valuation
expert, we benchmarked key market related assumptions
in management’s valuation model used to determine
recoverable amounts against external data, including
assumptions of future prices, revenue growth rates and
discount rates. Furthermore, we checked the mathematical
accuracy of management’s valuation model and agreed
relevant data, including assumptions on timing and future
capital and operating expenditure, to the latest plans and
budgets.
We assessed whether possible changes in the key
assumptions could lead to an impairment of the recognised
goodwill and assessed the likelihood of such a change
occurring given past and forecasted performance.
We found the Group’s estimates and judgements used in
the goodwill impairment assessment to be supported by the
available evidence and have not noted material exceptions.
Goodwill impairment assessment
The Group describes its accounting policies
concerning business combinations and goodwill
within Note 2.6 and provides details on the
carrying amount of goodwill and significant
accounting estimates involved in Notes 2.7 and 12.
We focused on this area due to the significance
of goodwill balance of TRY 47 million (2018: TRY
45 million) to the financial statements and because
the assessment of management of the recoverable
amount of the Group’s Cash Generating Units
(“CGU”) involves judgements on estimates such as
the future results of the business and the discount
rates applied to future cash flow forecasts.
In particular, we focused our audit effort on goodwill
recognised in relation to the acquisition of Pizza
Restaurantları A.Ş. in Turkey amounting to TRY
38 million in 2010.
The Group prepared a goodwill impairment
assessment as required by IAS 36. Key assumptions
applied in the impairment assessment include
amongst others, the expected (average) product
price, revenue growth rates, product cost and
related expenses. Management determined these
key assumptions based on past performance and its
expectations on market developments. Additionally,
management applies discount rates, which reflects
country specific risks.
Management concluded that there is significant
headroom between the recoverable amount of the
CGUs and the carrying values.
DP Eurasia N.V. Annual Report and Accounts 2019 | 141
Key audit matter
Our audit work and observations
The Group describes impact of first time adoption
and its accounting policies within Note 2.4 and 2.6
and provides details on the right-of-use assets on
Note 11.
IFRS 16 ‘Leases’ (‘IFRS 16’) is effective for periods
beginning on or after 1 January 2019. The application
of the new standard resulted in the recognition of
right-of-use assets amounting to TRY 162 million,
lease receivables amounting to TRY 58 million and
increase in financial lease liabilities amounting to
TRY 220 million as per 1 January 2019. The Group
has applied the simplified transition method in the
first-time adoption of IFRS 16 and has not restated
comparative consolidated financial statements.
The measurement of the right-of-use assets and
financial lease liabilities are based on significant
estimates and assumptions of management. Key
assumptions applied include, amongst others,
the incremental borrowing rates used to discount
cash flows and assessment of options to extend or
terminate lease contracts.
Given that the impact of IFRS 16 adoption is
significant to the financial statements and the
management judgement involved, we considered
this a key audit matter.
We evaluated the completeness of the contract lists obtained
from management, assessed selected contracts whether
they are a service or lease contract and evaluated whether
the contracts defined by the Group as leases are in scope of
IFRS 16.
We recalculated the right-of-use assets and related financial
lease liabilities recognised in the consolidated financial
statements. We assessed the appropriateness of the
assumptions and key judgements applied by management
in determining the expected lease period for each lease,
including the likely exercise of renewal options and the
incremental borrowing rate.
For a sample of leases we agreed the lease terms used,
including extension options if applicable, in management’s
calculation to the various contracts.
We also assessed the appropriateness of the disclosures
in the consolidated financial statements in relation to the
application and adoption of IFRS 16.
We found the Group’s estimates and judgements used in the
IFRS 16 adoption to be supported by the available evidence
and have not noted material exceptions.
Report on the other information included in the Annual Report
In addition to the financial statements and our auditor’s report thereon, the Annual Report contains other information
that consists of:
• the overview, management report, other information and additional information;
• the remuneration report;
• the other information pursuant to Part 9 of Book 2 of the Dutch Civil Code.
Based on the procedures performed as set out below, we conclude that the other information:
• is consistent with the financial statements and does not contain material misstatements;
• contains the information that is required by Part 9 of Book 2 and the sections 2:135b and 2:145 subsection 2 of the
Dutch Civil Code.
We have read the other information. Based on our knowledge and understanding obtained in our audit of the financial
statements or otherwise, we have considered whether the other information contains material misstatements.
By performing our procedures, we comply with the requirements of Part 9 of Book 2 and section 2:135b subsection 7 of
the Dutch Civil Code and the Dutch Standard 720. The scope of such procedures was substantially less than the scope
of those performed in our audit of the financial statements.
The Board of Directors is responsible for the preparation of the other information, including the Board of Directors
report and the other information in accordance with Part 9 of Book 2 of the Dutch Civil Code and the remuneration
report in accordance with the sections 2:135b and 2:145 subsection 2 of the Dutch Civil Code.
Other information 142 | DP Eurasia N.V. Annual Report and Accounts 2019
Independent auditor’s report continued
To: the general meeting and Board of Directors of DP Eurasia N.V.
Report on other legal and regulatory requirements
Our appointment
We were appointed as auditors of DP Eurasia N.V. following the passing of a resolution by the Board of Directors at a
meeting held on 29 May 2019. Our appointment has been renewed annually by shareholders representing a total period
of uninterrupted engagement appointment of three years.
No prohibited non-audit services
To the best of our knowledge and belief, we have not provided prohibited non-audit services as referred to in Article
5(1) of the European Regulation on specific requirements regarding statutory audit of public-interest entities.
Services rendered
The services, in addition to the audit, that we have provided to the Company and its controlled entities, for the period to
which our statutory audit relates, are disclosed in Note 7 to the Company financial statements.
Responsibilities for the financial statements and the audit
Responsibilities of the Board of Directors
The Board of Directors is responsible for:
• the preparation and fair presentation of the financial statements in accordance with EU-IFRS and with Part 9 of Book
2 of the Dutch Civil Code; and for
• such internal control as the Board of Directors determines is necessary to enable the preparation of the financial
statements that are free from material misstatement, whether due to fraud or error.
As part of the preparation of the financial statements, the Board of Directors is responsible for assessing the Company’s
ability to continue as a going concern. Based on the financial reporting frameworks mentioned, the Board of Directors
should prepare the financial statements using the going-concern basis of accounting unless the Board of Directors
either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so. The Board
of Directors should disclose events and circumstances that may cast significant doubt on the Company’s ability to
continue as a going concern in the financial statements.
Our responsibilities for the audit of the financial statements
Our responsibility is to plan and perform an audit engagement in a manner that allows us to obtain sufficient and
appropriate audit evidence to provide a basis for our opinion. Our objectives are to obtain reasonable assurance about
whether the financial statements as a whole are free from material misstatement, whether due to fraud or error and to
issue an auditor’s report that includes our opinion. Reasonable assurance is a high but not absolute level of assurance,
which makes it possible that we may not detect all material misstatements. Misstatements may arise due to fraud or
error. They are considered to be material if, individually or in the aggregate, they could reasonably be expected to
influence the economic decisions of users taken on the basis of the financial statements.
Materiality affects the nature, timing and extent of our audit procedures and the evaluation of the effect of identified
misstatements on our opinion.
A more detailed description of our responsibilities is set out in the appendix to our report.
PricewaterhouseCoopers Accountants N.V.
Original has been signed by
R.P.R. Jagbandhan RA
Amsterdam, 26 March 2020
DP Eurasia N.V. Annual Report and Accounts 2019 | 143
Appendix to our auditor’s report on the financial statements 2019 of DP Eurasia N.V.
In addition to what is included in our auditor’s report, we have further set out in this appendix our responsibilities for the
audit of the financial statements and explained what an audit involves.
The auditor’s responsibilities for the audit of the financial statements
We have exercised professional judgement and have maintained professional scepticism throughout the audit in
accordance with Dutch Standards on Auditing, ethical requirements and independence requirements. Our audit
consisted, among other things of the following:
• Identifying and assessing the risks of material misstatement of the financial statements, whether due to fraud or error,
designing and performing audit procedures responsive to those risks, and obtaining audit evidence that is sufficient
and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from
fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions,
misrepresentations, or the intentional override of internal control.
• Obtaining an understanding of internal control relevant to the audit in order to design audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the
Company’s internal control.
• Evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates and
related disclosures made by the Board of Directors.
• Concluding on the appropriateness of the Board of Directors’ use of the going-concern basis of accounting, and
based on the audit evidence obtained, concluding whether a material uncertainty exists related to events and/or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude
that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures
in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on
the audit evidence obtained up to the date of our auditor’s report and are made in the context of our opinion on the
financial statements as a whole. However, future events or conditions may cause the Company to cease to continue as
a going concern.
• Evaluating the overall presentation, structure and content of the financial statements, including the disclosures,
and evaluating whether the financial statements represent the underlying transactions and events in a manner that
achieves fair presentation.
Considering our ultimate responsibility for the opinion on the consolidated financial statements, we are responsible
for the direction, supervision and performance of the Group audit. In this context, we have determined the nature and
extent of the audit procedures for components of the Group to ensure that we performed enough work to be able to
give an opinion on the financial statements as a whole. Determining factors are the geographic structure of the Group,
the significance and/or risk profile of Group entities or activities, the accounting processes and controls, and the
industry in which the Group operates. On this basis, we selected Group entities for which an audit or review of financial
information or specific balances was considered necessary.
We communicate with the Board of Directors regarding, among other matters, the planned scope and timing of the
audit and significant audit findings, including any significant deficiencies in internal control that we identify during our
audit. In this respect, we also issue an additional report to the Audit Committee in accordance with Article 11 of the EU
Regulation on specific requirements regarding statutory audit of public-interest entities. The information included in this
additional report is consistent with our audit opinion in this auditor’s report.
We provide the Board of Directors with a statement that we have complied with relevant ethical requirements regarding
independence, and to communicate with them all relationships and other matters that may reasonably be thought to
bear on our independence, and where applicable, related safeguards.
From the matters communicated with the Board of Directors, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit matters.
We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the
matter or when, in extremely rare circumstances, not communicating the matter is in the public interest.
Other information 144 | DP Eurasia N.V. Annual Report and Accounts 2019
Contacts
Advisers
Company registered office
and business address
English Legal Advisers
to the Company
Dentons UK and Middle East LLP
One Fleet Place
London, EC4M 7WS
United Kingdom
Dutch Legal Advisers
to the Company
Houthoff Coöperatief U.A.
Gustav Mahlerplein 50
1082 MA Amsterdam
The Netherlands
External Auditors
PricewaterhouseCoopers
Accountants N.V.
Thomas R Malthusstraat 5
1066 JR Amsterdam
The Netherlands
DP Eurasia N.V.
Herikerbergweg 238
Luna Arena
1101 CM Amsterdam
The Netherlands
Corporate Brokers
Morgan Stanley & Co
International plc
20 Bank Street
Canary Wharf
London E14 6AD
United Kingdom
Liberum Capital Limited
Level 12
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
United Kingdom
Glossary
UK Depositary
Interest Register
Link Market Services
Trustees Limited
4 Beckenham Road
Beckenham
Kent BR3 4TU
United Kingdom
Financial PR
Buchanan
107 Cheapside
London EC2V 6DN
United Kingdom
ADBP Annual and deferred bonus plan
AFM Dutch Authority for the Financial
Markets
AGM Annual General Meeting
Board The Board of the Company
CEO Chief Executive Officer
CGU Cash-generating unit
Company DP Eurasia N.V.
Fides Food Systems Fides Food Systems
Coöperatief U.A.
Fidesrus Fidesrus B.V.
Founding Shareholders Fides Food Systems
Coöperatief U.A. and Vision Lovemark
Coöperatief U.A.
LTIP Long-term incentive plan
Master Franchisors Domino’s Pizza
International Franchising Inc. and,
prior to the assignment to DPIF in 2012,
Domino’s Pizza Overseas Franchising B.V.
MFA Master Franchise Agreement
GBP Great British Pound
OLO Online ordering
General Meeting General Meeting of
shareholders of the Company
PwC PricewaterhouseCoopers Accountants
N.V.
Domino’s Turkey Pizza Restaurantları A.Ş.
Group The Company and its subsidiaries
Domino’s Russia Pizza Restaurants LLC
DP Eurasia DP Eurasia N.V.
EBITDA Earnings before interest, tax,
depreciation and amortisation
EUR Euro
Fides Food Fides Food Systems B.V.
IFRS International Financial Reporting
Standards as adopted in the European Union
IPO The initial public offering of the
Company and the admission of its shares to
trading on the main market of the London
Stock Exchange
PwC Turkey PwC Bağımsız Denetim ve
Serbest Muhasebeci Mali Müşavirlik A.Ş
RUB Russian Rouble
System stores Corporate stores and
franchised stores
TPEF II Turkish Private Equity Fund II L.P.
TRY Turkish Lira
USD US Dollar
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