DP Poland (LSE:DPP) — Trading update for the six months ended 30 June 2021

0:01 Good afternoon, ladies and gentlemen, and welcome to the DP POLAND PLC Trading Update for the Six Months Ended 06/30/2021. Throughout this presentation, investors will be in listen only mode. Questions are encouraged, can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Please just simply type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all questions submitted today and publish responses where it's appropriate to do so. These will be available via your Investor Meet company dashboard, and we'll

0:32 send you an e mail when they are ready for your review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll. If you would give that your kind attention, we would be most grateful. And I'd now like to hand over to Nick Donaldson, Non Executive Chairman of DP POLAND. Good afternoon, sir. Good afternoon, Mark, and good afternoon, everybody. Thank you very much for making the time to join us. I'm Nick Donaldson. I'm nonexec chairman of DP POLAND PLC, and I have been for some years now. And I'm delighted to welcome you all to our first investor meet conference call. So so given it's our first two, do please bear with us. We'll do our absolute best. The aim is just for us to speak for about thirty minutes for a question and answer session thereafter, and we hope to have the whole thing contained within thirty sixty minutes, one hour.

1:22 So the purpose of this meeting is to provide an update on the merger of DPP and Dominion. Back at the time of the announcement of the transaction, we called it I called it the board called it a transformational deal.

1:36 The deal completed early in calendar twenty twenty one. We're still the view that it's a transformational deal for this business, and I hope that this presentation will show you that. We are you know, we remain and we are and we remain very excited for the outlook of the enlarged group. So I think probably the starting point, because you don't need to hear from me because I'm sort of part of the past, what you want need to do is to meet and to hear from, you know, the new exec team, the guys in Poland, and also to interact with our largest shareholder. And so if we can go onto the slide with pictures of the four of us, that would be very handy.

2:13 There we go. Excellent. So if we I've introduced me. That's my background. But, Piotr, if you'd introduce yourself, please.

2:25 I'm the CEO of Domino's Pizza Poland. I have joined the board in January this year, and I was previously with Dominion for twenty years. I started as regional manager responsible for overseeing the 15 restaurant at that time. Next, I was promoted to general director. My responsibility included purchasing operations, office administration, oversight of IT. And, finally, in 2018, I become CEO. I started my career in Karful, Poland, when I was responsible for purchases and price management.

3:12 Thanks, Piotr. So that's Piotr, our CEO. Over now to our CFO, Margaret Sato Potkanska. Gossia is better known as that. It's much easier for us Brits to pronounce that name. Gossia, please introduce yourself. Thank you, Nick. Good afternoon, ladies and gentlemen. My name is Manguszka Pokkaiska, and I am a CFO of DP POLAND. I've joined DPP in January 2021. Previously, I was a CFO of Dominion for four years, and I started my professional career at PricewaterhouseCoopers in audit department. Thank you. Thanks, Garcia. So, Shermeck, if you will, if you introduce yourself. And then I think at this point, you're gonna say a little a little about the the rationale for this deal, and then we're gonna go forward from there. Yeah. Thank you, Nick, and a very good afternoon to everyone.

4:06 My name is Cemig Svabrovskiy, and I joined the board in January this year. I'm also the chairman of the Polish Private Equity Association and the co managing partner of Accession Capital Partners. ACP is a private equity fund manager operating in Central Eastern Europe for almost twenty years.

4:27 We invest in growth situations in in this part of the world, and we actually capitalize on the convergence of CE to to Western Europe. We have completed almost 60 transactions in the region, raising four funds from institutional investors. And our third fund is investor in the ace in Domino's Pizza, Poland, and previously was investor in in in Dominion. As Nick said,

4:57 our third fund is a 45% shareholder in the in the entity being the largest shareholder, and and me and and my colleague represent the fund on the board. The merger of the two companies, this is what also Nick referred to. The merger of the two companies being Dominion and Dominus Pizza Poland was always very clear to us.

5:20 The two companies operated on the same market, targeted the same audience, and offered very similar products. The brands were similar, so the merger of the two companies was the most straightforward combination of of pizza restaurants or pizza businesses in the country. And, also, it removed the confusion that the customers had anyway. The combined the the appeal of of the merger is to create the leader in pizza delivery in Poland, which generates to us a number of a number of synergies that are both on the top line and also on the on the cost side.

6:06 The companies were competing with each other. So putting the two businesses under one roof enables us to to be much better pricing, to have more room to maneuver on on on on the sales tactics and also marketing. The the two separate teams spent quite some effort on trying to differentiate to to to share why one product is better than the other. And now we can use all this effort and money to promote only one brand. And by combination of the two companies, only we can increase the visibility of the brand both in in offline on the streets, but also in online when we do not need to compete, for example, for for AdWords in in in Google.

6:56 The the the the the there are some obvious synergies that I will comment on on on on maybe later on, but I just wanted to to give you an impression of of how transformational this deal is. Looking at at Warsaw, which is the largest Polish city, we are now the largest pizza delivery business here, which means that our distance to customer is much smaller. The two companies competed with each other.

7:27 They were the the la one of the largest players here, but now the size doubled, which means that the distance is is roughly well, arithmetically, it's half. In practice, our estimates show it's something like 30% smaller, which is quite a major saving for for a delivery business. We'll comment on the comment on this maybe later on. Before I I maybe hand over to to Ghosha, you will hear today a bit about the statutory accounts.

8:02 We wanted to comment on those as you can see those published on our website. We, however, think that this is not that relevant as in other cases. This is mainly for two reasons: 2020 is a year affected by COVID. And secondly, because of the international accounting standards, in 2020, we couldn't share with the combined business audited by auditors. But I don't want to steal the show from Scotia, so I will hand over to Scotia now. That's great. If I can just say this, I mean, frankly, 2020 is history in effect. What we're much more excited about is talking about the future. So we'll whizz over the historic stuff, but if there are any questions, obviously, we will address that. Scotch, over to you.

8:53 Nick. Once again, good afternoon, ladies and gentlemen. I'd like to say it's a great pleasure for me to comment the financial performance of DP POLAND for the first time as the company's chief financial officer. As Shamen already mentioned, 2020 was marked by challenges of the COVID nineteen pandemic, which had a severe impact on the operations and performance of many industries worldwide, including the restaurant and food delivery sectors in Poland. The ability to provide indoor dining services has been restricted by Polish government guidelines twice in 2020.

9:26 These restrictions have inevitably negatively impacted restaurants performance. However, in contrast, the full food delivery sector has thrived. The food delivery sector in Poland has grown during the pandemic and the group with its short delivery times, contactless payments, and delivery or collection service has took advantage from this sector's growth despite the unfortunate circumstances. The number we present on this the numbers we present on this slide are statutory accounts for a reverse acquisition. So please be aware they do not represent the merger impact. System sales growth of 5% is primarily due to the group's delivery operations, taking advantage from the COVID-nineteen restrictions and the improved food delivery dynamics in Poland.

10:11 DP Poland's performance in 2020 consistently improved from quarter to quarter with negative like for like growth during the outset of the COVID-nineteen pandemic to a 12.9% increase in the last quarter of twenty twenty. Revenue increase of 6.9% is a result of buying back subfranchised stores. In the second half of twenty twenty, we have bought back seven subfranchised stores. The increase of loss for the period is a result of specific circumstances referring to minimum wage increase in Poland of 16%, increased scooter maintenance cost as the fleet becomes older and acquires more repairs. And additionally, 2020 numbers are impacted by reverse takeover related expenses, which were approximately £11,100,000.

11:00 That's great. Thanks, Josie. And now if we move forward, we'll give you on our next slide a picture of a consolidation, a pro form a consolidation of the two businesses to give you an idea of the scale of the business. But, you know, that's again history. It's more the future we're talking about. But, Gossia, back to you, please.

11:19 Bring it back to Przanak to to tell a few words. Yeah. I mean, I I for for for some of you, this is actually the first time we we we present the the the story behind the merger and also what what the the meaning was. So so very few points here looking at prospectively. The first point is to to connect to what I mentioned before. The merger of the two companies meant doubling scale of of the business. You can see that on the top line both in 2019 and and and and 2020. The second important comment to make is about the profitability. You could see on the on the previous slide that Domino's Pizza Poland was loss making in 2019 and and 2020.

12:07 And by combination of the two companies, we immediately get into profits. Just also to clarify, this is a pro form a consolidation, which means the numbers are simply added of of the stand alone company. So that does not include any

12:24 any synergies neither on the top line nor on the on the bottom line, which means cost synergies. On on when explaining the dynamics of 2020, I think it's an occasion to comment a little bit about the the business models. Domino's Pizza Poland was predominantly the a delivery business, but the menu was standing on two legs. One was delivery, the other one was dine in. The dine in part of the business was affected by the lockdown measures, as you can imagine. But the loyalty of customers proved to be there, and our customers switched from dine in to to the delivery business. This is why despite the restaurants being closed, we we could deliver only a small decline in the in the top line dynamic.

13:17 It had, however, an impact on overall profitability as delivery business is a bit more expensive than than the dine in because, obviously, of the delivery cost. The other costs are the same, and the delivery cost being the additional has an impact on on profits. And that's why you can see 2020 performance being worse than 2,019. However, again, to be noted, this is a transformational deal because from the from the losses, even in such a difficult year, without any synergies, the business

13:53 cost on a consolidated basis became profitable. Maybe the last comment about the loss for the period and adjusted loss. We are not very well, me as a as a representative of the shareholder, we are not that much concerned about that number because to some some extent, it is driven by noncash items, which is depreciation and amortization. And and to to to another extent, it is an impact of the shareholder loans that were in the medium and were done at a higher cost. This was our private company, so we could decide. And and that is nonrecurring anymore. So this is why we we actually pay attention to to the profitability at the at the EBITDA level. So I think this is all on my end regarding this this this slide and also giving you a bit of backgrounds to to Dominion and and how we see that this transaction changed the the the overview of the entire business. Thank you. Thanks for that, Cemak. Kagosio,

14:55 is there anything you would like to add on the slide of the pro form a? Yes. Thank you, Cemak, for making this introduction. What I would like to say is that the acquisition of Dominion has almost doubled the business in terms of sales and number of stores. Dining sales of Dominion restaurants was significantly impacted by by COVID nineteen restrictions in Poland in 2020. As already mentioned, the government has restricted dining twice in 2020, once during the spring for nine weeks as well as the autumn for the last ten weeks of 2020, and continuing in 2021 for a further twenty one weeks. An impact of this is visible in the revenue and system sales numbers you can see on the slide. As you can see on 2019 numbers, Dominion has a track record of positive EBITDA and it more than offsets the losses generated by DP POLAND PLC in 2019.

15:53 Thank you.

15:57 I think next thing is to move forward to Piotr, who's gonna talk about the future rather than the the history, just integration progress to date and putting these two businesses together. Piotr, over to you. Yeah. Thank you. Maybe be before Piotr starts, I would also maybe comment on, you know, how how we see the the synergies sort of from the from the shareholders' perspective and and what are the what was the key rationale for us to get into it. And then I would I would hand over to to to discuss how far we got, if if if that's okay with you.

16:31 Great. So as as I mentioned, the the the the the two main drivers that got us into into the situation where we are in, and and you will hear very shortly that we are we are basically on track. And we we we do not see a reason to to to become less optimistic. The first is about the top line synergy and the top line growth. That can be decomposed into the increased volume. Both businesses have much better visibility, much better footprint. Dominion with its dine in business is located on high streets and in very high traffic locations,

17:12 which should now serve the entire network. The all delivery business is done on the Domino's brand as of now. The dine in will be done partially or temporarily under brands called Dominion by Dominos. That is to ensure a a smooth customer journey of of Dominion customers, but that already promotes

17:36 the brand of of Domino's and contributes to the overall brand awareness. Additionally, we we can already see a trend in growing the average check. Will comment on this also shortly, but that was one of our clear synergies on the top line. We could see that the two businesses, although operated on the same market, served the same customer base, they had different average check size, and then we can already report that this

18:09 gap is narrowing, if not eliminated, between the two stores, and it's going up. And going up is is a major improvement because in delivery, the cost of delivery is is fixed. It's connected with the wage. But the more revenue we get per order, the every incremental euro or the water of sales brings us much better

18:33 profit margin. So that is already happening. You will hear about it shortly, but that was one of the key drivers. Thirdly, technology. We have launched a new website this at the beginning of this year, and we are about to launch a new mobile application. And all of that will serve one brand, the obvious economies of scale, not only in terms of software development, but also positioning in Internet and and online where much easier to find and we are much more visible in Internet.

19:04 Lastly, customer engagement. The we want to grow the business in the delivery direction, but the dine in locations serve as an an opportunity for our customers to get a better customer experience. If you take a parallel of Apple, these are like Apple shops or stores where you can touch the product, when you can see it, when you can spend nice time, but then you buy it somewhere else. So we we believe that this is a transformation on the top line, and you will hear shortly that we are getting there. And and we already see the first benefits of of of that strategy being implemented. There are also many cost savings that that got us excited about this deal. These relate to procurement.

19:56 As you can imagine, doubling the scale means we can buy products more optimal, which is basically cheaper. We have eliminated parallel cost related to rental rent of the office, to management teams, to auditors, and so on and so on. But most importantly, as I mentioned also before, the the distance to our customers got shorter. We we got closer to customer, and that brings us two types of of of benefits. First is on the on the customer experience and the quality of the product, and second is about the cost. As you know, even the best pizza composed of the best ingredients is not tasty if it comes cold.

20:44 So by shortening the distance to customer, we can now provide much better quality product and and warm tasty pizza. In addition to that, it's not only the benefit to the client, but it's also a benefit to us because if we pay the hourly rate to our driver, then this driver can serve more customers per hour, which means that our unit economics per delivery got much better. And then it also means that looking at competitors, our position is difficult to challenge because no no one has such a network of delivery stores in Poland and particularly in in in Warsaw. So this is I wanted to give you a snapshot or a view that was driving us when we were discussing this deal, and this is why we entered into this transaction.

21:40 I will now hand over to Piotr, who will go into the details and will give us an update on the implementation. But you will hear that we are on track. Piotr, handing over to you. On this slide, I will try to summarize many months of hard operational work related to the integration. We have built a combined menu of the best selling items from both companies. The most important of these are the new types of pizza, but also new sizes. For example, 16 inch pizzas. The new menu items are very popular. Customers buy more products, and the average checks check is growing.

22:28 Overall, the average check has increased by 10%. The increase of minimum order has direct translation to the higher profit as the cost of delivery is still fixed. We have initially anticipated cost synergies come among others from lower prices of raw materials. But unfortunately, the reality proved to be different. High inflation rate in Poland, almost 5%, did not allow us for reduction of supply costs, but it did allow us to increase our selling

23:14 prices by circa 57%. Commissaries in DPP were built for a large scale, but then DPP had before the transaction. After the merger, both company both commissaries can finally work at the scale for which they were built. We have decided that commissary will now be separate business unit that buys ingredients from third party suppliers and sell to all stores at normal market prices. That approach help us to better assess its contribution to the profitability and manage its performance.

24:05 We have initially anticipated that the logistics will be done internally, but at the end, we have decided that it is more economical to outsource that to an external company that specialize in distribution and logistics. Referring to headquarter, we have successfully integrated both teams using the best talent from both companies. We had to unify the remuneration policy, which resulted, unfortunately, in some people in headquarter leaving the organization in the last six months. But now we are happy to report that we have a stable and dedicated team for future.

24:58 One another important thing, we have terminated the office rent of all DPP's headquarter and moved the personnel to the Dominion office, and that saved us the rent cost, but also other running costs. We cannot forget about the synergy effects in marketing. We have launched a new website, as Tremec mentioned, which with improved user experience across all all devices. I want to emphasize that our website is what was named the site of the year 2020 by Kentico, who is our content management solution provider.

25:50 We are also advanced in launching new smartphone app for placing orders. We have aligned the promotions in both concept shortly after the merger and gradually unified the menu, which we believe is now more attractive for customer. I have to mention that due to the delay in IT integration, the benefits of the marketing synergy are not yet fully visible in the financial performance. As Przemek mentioned, one of the most significant synergy effect is delivery savings. Thanks to the increased density of Domino's Pizza stores after the integration, we will be able to reduce the delivery zones for most of of the stores.

26:44 A smaller delivery zone means shorter delivery time, which improves the customer experience and then translate into lower delivery cost per order. We also expect a general reduction in scooter maintenance cost as the enlarged fleet is now managed by an internal department responsible only for optimizing the scooter servicing costs. And finally, we are in the process of unifying the rules of cooperation with food delivery aggregators who will, from now on, be responsible only for generating orders while the delivery will be performed by our own staff.

27:34 I also want to quickly present new franchise model. At this stage of preliminary analysis before the merger, we decided to buy out sub franchise stores which overlapped in terms of the deliveries on with corporate stores. According to this, last year, we took over seven stores from franchisees. And this year, we took over another 10 stores, including one store which was taken over last week. We currently cooperate with four sub franchisees who operate eight stores in total. And our primary focus for the coming months is improving the performance of all stores.

28:27 And once the stores reach satisfactory KPIs, we will offer some of the locations to existing or or new sub franchisees. So that in in couple years in a couple years, the majority of our locations become sub franchised stores. I know it is a long slide, but in the end, I want to say more about call center as a new internal unit in DPP. Until now, telephone orders in Domino's pizza stores were taken directly by the store staff, while the orders at the Dominion were taken centrally by a call center. Following analysis, we decided to use the Dominion model.

29:21 We expect average order to increase by approximately 3.5 as a result of upselling by call center operators. In addition, consolidating phone orders under one single phone number for whole country will improve marketing communication. Thank you, Nick, for this time. You can see this, ladies and gentlemen, there's a lot of work been going on. We're halfway through the year, so we thought it might be helpful to give you a trading update to the first five months of the year and then talk about June itself. So, Garcia, over to you, please. Numbers on this slide represent unaudited consolidation of the enlarged group for five months of 2021, so the period between January and May.

30:20 As a way of introduction, I'd like to explain what system sales stands for because maybe not not everyone knows it, it is sales of all Domino's branded stores in Poland. So both corporate and sub franchise stores. We observed strong delivery sales performance, almost offsetting dine in shortfall caused by lockdown. During the first five months of 2021, delivery sales of the enlarged group increased by 14% comparing to 2020 and by 28% compared to the same period of 2019. This is a result of the enlarged group taking advantage on growing delivery market in Poland due to dine in restrictions applied by Polish government.

31:13 The dine in business is significantly impacted by restaurant shutdowns. Stores remain closed for dine in service since the beginning of 2021 until May 28. Dine in revenue recognized in 2021 is almost purely relating to takeaway orders. The large group takeaway sales grew of approximately 6% generating 8,800,000 Polish zlotis of dine in and takeaway sales in 2021. Like for like system sales during the 2021 are flat compared to 2020 and only 5% lower compared to 2019, so the pandemic environment.

32:02 And the revenue was lost due to permanent store shutdowns. We have been privileged to be able to operate during the pandemic and take pride in the enlarged group sales performance so far. Basically, the five months are still impacted with the lockdown. The business is operating after the merger and it is growing. The numbers, I will say it once again, the numbers on this slide fully refer to lockdown period. That is why we would like to present post lockdown number numbers for June. I will just skip to to another to to the second slide. So, as I already said, COVID pandemic has highly impacted dining sales in Poland.

32:52 The government restrictions were just removed on May 14 allowing to serve food in summer gardens and indoor dining was resumed on May 28, but still some restrictions apply as only 50 of inside tables may be occupied by customers. The business is not in its best show yet, but the delivery business is only 2% down on 2020, but the dine in has increased. We observed 5% like for like growth in June despite all the restrictions applying to dine in. As already mentioned by and dine in business typically generates higher gross margin due to absence of delivery costs.

33:37 Ex Dominion dine in stores were able to benefit from a relaxation of restrictions with 3,200,000 zloty's dine in sales generated between May 28 and June 30. As you see, the enlarged group realized 25% like for like increase in dine in sales in comparison to 2020. And at the same time, we are targeting to reach 2019 numbers. So the pre pandemic environment and a very good year in terms of dine in sales in ex Dominion stores. And we still miss 24% of, like for like sale to 2019. The full impact of post COVID nineteen environment is not visible yet, as a large number of our customers are students who have not came back to universities in 2020 as their universities operated online classes for the whole year. Additionally, working from home is too prevalent, although most companies implement hybrid model of working.

34:34 So we expect expect positive impact of this change also. Thank you, for your comment. I just want to add that the chart on the left is a confirmation of what I said earlier in this presentation, the 10% increase in average order just after the post conversion is complete shows our potential for the future. The chart on the right shows that sales potential of dine in in the first day after the opening of Summer Gardens. As Christian mentioned, there are still no student, no offices. Let's not forget to the tourists as well. Usually, in May and June, tourists would already have been here in Poland, but they are now absent completely.

35:33 Going to the last slide, to summarize, I would like to say that all the tasks related to the merger of both companies have been completed. Integration of the POL system turned out to be the biggest challenge for us. For this reason, we have slight delay. We assume that we will see the full picture of the synergy after the holidays. The last information that is very nice and encouraging for the entire DPP team, that we have received one of the most important award awarded by Domino's Pizza International called Gold Friendly Award.

36:20 It is a recognition of very good operational result and compliance with DPP standards as well as appreciation of the process of merging Domino's Pizza and Pizza Dominion on the Polish market. Thank you all for your attention. Thanks, Piotr. Mark, I think it's over to you now. That concludes our presentation. We're going to move on to Q and A, and Chairmaker is going to chair those. That's fantastic. Nick, thank you very much, and thank you to the rest of the DP POLAND team for presenting this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. I'd like to remind you that a recording of this presentation, along with a copy of the slides and the published Q and A, will will be accessed via your Investor Meet company dashboard.

37:13 I'd also like to remind you that your feedback is important to the company. And immediately after this presentation has ended, you'll be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations. Obviously, now is probably a good time to hand back to you guys for the Q and A. Obviously, investors had the opportunity to pre submit questions, and thank you to those investors that took time to do so and also to those that have submitted the number of questions that have come in through today's meeting. If I could just hand back to you and ask you if you would be so kind to read out the question and give a response where it's appropriate to do so, and I'll pick up from you at the end. Okay. Thank you, Mark. Indeed, we we received some questions during the presentation. We also got some some some questions in advance. Some of those are very similar, so I'll try to consolidate those and and and we'll tackle one by one.

38:05 Hopefully, we can manage to to cover all of them today. There were questions related to the to the to sub franchisees. There there were a few questions about that. Already, I think, addressed that. But since there were, I think, three or four questions on the same topic, then then I would allow myself to comment on that as well just to make sure that it's absolutely clear to everyone. We have upgraded the business. The work that Piotr presented, the integration required a lot of effort that was put over the last six months, and the business has upgraded significantly. In order to to get there, we also bought back some of the subfranchise stores to allow us to to to have the liberty of redesigning delivery areas, redesigning the products, and upgrading the entire network.

39:01 Our intention is that once we deliver improved performance, which is definitely which will be definitely the case. The question is only by how much, and that we will we will see in the next months. Once we get there, the our intention is to to sell those stores to sub franchisees. And that will be done in two ways. Firstly, to our employees and secondly, to third parties. We have developed an HR policy where the at the pinnacle, our best employees will be offered to take over our stores with also with our support and and manage them as as as as operators under Domino's brand. Our target is that vast majority of the network will be subfranchised, and our share of the corporate stores will be around 20, maybe 25% or even lower. So summarizing, our goal is to to have some corporate stores, but vast majority to be subfranchised, which has a number of of of advantages from the capital perspective, but also efficiency perspective.

40:19 We we made a sort of a step back to to be able to redesign the business, to upgrade it, and allow us to choose the best operators on the market. It it is key that the stores are operated by the best operators because that's that's the mutual benefit. So I think I tackled probably three or four questions related to to to the subfranchise store. But if there are any other, then please let us know. There is there is another question which deals with the with the normalized what would you consider a normalized pro form a EBITDA run rate in post COVID environment? And there's also a second part of of this question that I will now put on hold for for a second because it relates more to the investor relations.

41:10 We we reported to you the five month performance, which was during the lockdown, that that we believe is not likely to to continue. We see the ground number of cases in Western Europe. Poland comes out quite well in that in that context, but but it it we we conservatively assume or we assume that we will also get another wave. However, the business is already very well prepared also to tackle that. The the it took us some there's also another question about the I n t IT integration. The systems are now fully integrated, but it took us quite some time to integrate this back back end system, which also connects us to Domino's international back end system.

42:03 It took longer than I'd anticipated, but already in July, we operate as one brand in online. And that has a big advantage on the top line and the cost side. We, however, cannot yet report the run rate EBITDA. As we mentioned before, we have no reasons to question our synergy outlook that we had when doing this deal. We think all those those assumptions still hold in nominal terms. But the run rate EBITDA, we will see only based on on on July figures. And still, that is not fully post COVID, to to answer Mark, because the the as as Piotr and Margotjata mentioned, we still don't have our target audience in in in markets where we operate.

43:02 Universities operate on the remote basis, so students are still in their hometowns, not in larger cities. Like, Warsaw is a big market for us, so they are not here. Same with the offices. I'm talking to you out of our office in Warsaw, but I'm one of the few here. People still work mostly from home. And and then a pizza ordering pizza is also very very common when when you work out of office and stay long hours. So these these customers are still not yet here. So we don't have a view on the post COVID run rate of EBITDA because this is not yet the environment. But we definitely see already the major improvement on the on the operating cost, and we see quite an encouraging top line dynamics.

43:58 Scotia mentioned the perf we divided the performance update in five months plus one month. Because in June figures, you could see that despite reopening of the dine in, our customers on delivery business stayed with us. And this is despite all those deficiencies or or restrictions that I mentioned about the students and and and and offices. So that that is quite encouraging, but it's not yet post COVID. Piotr, there is maybe also handing over a bit to Piotr. There is a question about the synergies. I think there are two questions about the synergies, if I can maybe if I can read it. Are you seeing the cost synergies that that you expected on yeah. What are the main cost synergies?

44:49 Can you maybe comment on I think you tackled this, but the question still came. So maybe you can Okay. Okay. I'll try to answer. We are generally in line with the expectations for synergy effects, such as new menu items, marketing synergies, new commissarize profit center, headquarter integration, especially delivery savings, as you mentioned many times, and internal call center. The only only one thing that is not delivered is savings on the purchases, prices of ingredients. We have initially anticipated cost synergy to come among others from this, But the reality in Poland, especially during and post pandemic, proved to be different.

45:41 High inflation rate did not allow for reduction of supply cost, but we found an alternative, first of all, by increasing our selling prices by, as I mentioned, 5%, 7%. And secondly, by increasing minimum order value for free delivery from 29 to 33 for use total. The overall effect should be the same. I want to mention that we continue to monitor market for new potential suppliers to ensure that we are purchasing products at the best market prices.

46:26 We have remembered that each suppliers needs to meet Dominos International Standard and be approved by DPP, which we successfully done on multiple occasion during the merger. So it's only a matter of time before we find alternative sources of supply with more attractive prices. The I got a message that the chat the chat is disabled, but but I I see q and a is open. So if people have questions, you can ask them through q and a, I I imagine. That's correct, indeed. So the chat function is disabled, but please do submit questions. Just tightly tip the the question in the box and press send, and that will come through to the presenters.

47:19 Thank you. So moving on, I a question about the IT systems and about the percentage of online orders that we see nowadays and how that compares to the past. May gotcha. May maybe that's this is something you can comment on. Repeat. The the percent the percent of online orders Yeah. For delivery. Because in in the past Yeah. There were also some orders, especially for the medium down for the call center. So can you comment on the data about the percentages? Yes. Of course. As the IT integration has just finished early July, and this allowed us to use perfect Domino's website, which, as Piotr already mentioned, has won, the best website award, of 2020.

48:22 And so, basically, before the the IT integration, the split of sales channels for ex Dominion stores were was slightly different than original Dominion stores, because, in ex Domino's stores, almost half of the orders, were placed through call center. And the usage of website, was, approximately 30%. This is in contrary to original Domino's stores, which almost 70% of orders goes through the website.

49:10 And as I mentioned, the website is is really good. And after finishing the IT integration, we do expect that the level of of orders done through website should be on approximately 50 between 50 to 60%. And we also expect the application for smartphones and mobile devices to become more significant sales channel. Okay. Thank you. I had the problem with unmuting.

49:55 There is also a question about the the the components of the 10% growth in average check. What are the main drivers? But I I would maybe I will give now I'll ask Piotr maybe to comment on that. But, Piotr, remember that also our competitors may be watching this, so don't give them hints. Just, you know, mention in in in high level what why we see the 10% growth. Thanks to our combined menu, thanks to new menu items such as salads, such as sauces special new sauces extra plate such as new size of 16 inch pizza pizza with the that is now exist before our merger.

50:57 I think that is more important things referring to this 10%. Thank you. I will try to tackle some of the questions that were raised in advance, and then I will go back to the question that were raised during the meeting so that people who who did spend some time before us would have rewarded for this. So there there are some questions related to the investor relations, and they also sort of repeated today. One is there was a question related to just a second. I will I will need to open it. Yeah.

51:49 But there is a question about what's I will read it loud. What further steps can the company take to improve their message to the market? And there are also some some other questions related related to that, so I'll try to tackle them altogether. We are in a in a very sort of a a strange environment, and also the situation of the company is is is also a bit extraordinary because the two businesses have merged. And it's it's quite difficult for us to present you with the data that you are used to seeing in other businesses.

52:35 That is what we are doing our best, but indeed this situation is quite unprecedented. This is why when we presented you some statistics, we compare ourselves to 2020 and 2029. Because on the one hand, we we we need to benchmark ourselves to the latest performance. But on the other hand, we understand that 2020 is is is a bit untypical. What we intend to do is also to excel or to to intensify communication with with with with our shareholders. And at least on the quarterly basis, we will be presenting you trading updates updates. We we understand that, as I mentioned at the beginning, we understand and we feel the same that the 2020 performance is not real relevant because it's pre merger, and it's also doing the COVID. So it doesn't give a really true well, it gives, from the accounting perspective, a true and fair view of the business.

53:39 But but from the business perspective, this is outdated. Furthermore, I would even say that the last five months data is is also quite quite outdated from the business perspective because the business in its final shape in in the run rate, as as one of you asked, we can observe only now. So in order not to to to delay too much delivery of the information that we believe will be positive because we can already see the the the hints of that, we want to intensify our our reporting and come back to you at least quarterly with with more with more details on the performance and and run rates in particular. There was a question related also to some research reports.

54:27 I will I'll try to find it. About improving analyst coverage, not only working with n plus one as a broker. Maybe maybe on that, Nick could could comment on what was the past practice and and then, you know, what is our plan going forward? Yeah. With pleasure. Thanks, Cenic. I can't actually see the question. Can you give me a clue what time it was so I can get it specifically? Nick, that was a pre submitted question. It it reads as follows. What plans do DPP have to improve analyst coverage with just m plus one senior covering them as their corporate broker? Okay. Thank thanks very much. Right. Well, the short answer is that as as as a lot of ladies and gentlemen following this will will will know, smaller companies tend very often just to have the house broker.

55:19 You know, there's been a great deal going on. We're delighted to have Singers on board who came on board a little while back, and we're hopeful to making the deal happen. We are hopeful that Singers will publish research fairly shortly when travel restrictions are are lightened so that the Singers analyst will get across. Now I'm aware that if you're not a client of Singers, to get access to that research courtesy of method two is difficult. In the past, DPP has used Harman to publish paid for research, which the public can access, And that is something we will look at. But right now, there's still a lot on our table to be dealt with. And also, it's an additional cost, and we're very cautious right now about keeping our cash under close control.

56:07 So I think in the short term, we've got seeing as for those who can access it, seeing as research note before too long, I hope. And from the company, quarterly updates, you know, the next one obviously being the results of June 30, which we're going have to start working on if well, we are already indeed. So I think that's all I can say at this point. Yeah. Thank you. Thank you, Nick. There are also a few few questions related to the to the liquidity of the stock and also potential dual dual listing of Dominos Pizza Poland. So I think those I'll try to answer those at the same time. We do not plan to do a listing at the moment.

56:55 We also know that the liquidity is low, but we want to basically show a momentum to the market. As I mentioned a few times already, we have spent a lot of time on being very lean operationally, improve the performance and this was our primary focus. We will consider improvement of investor relations and also other activities in the second half of the year, but we do not have plans to go for the dual listing. It is still anyway quite burdensome and expensive to keep the listed entities. So dual listing, I think it's still a small entity also to address some other question.

57:43 Moving on also addressing a question that also came out today. We do not plan any capital raises in the second half of the year. We feel we are fully funded. We have completed the integration by now. This was done in line with the budget, although with some delay. So indeed, we anticipated to have a higher cash position as of now because then the the the integration, if completed earlier, it would benefit us earlier. But we we are fine with what we have. The current balance is is is sufficient and satisfactory, and we do not plan any capital raisings going forward.

58:34 Well, with at least within the next six months. If we are to maybe this is also there is also a question about the new stores from Mark. Do we still plan to open five stores this year and around 10 next year? I think it's probably fair to say that we have just opened one store last week. We will there there was also another question, and I will try to tackle those at the same time. There was a question about the size of the business we envisage in. Then I will say this as a representative for the shareholders so that you don't chase Piotr for that going forward. But we see that there is a space on the market to grow the network by couple of times. But within the next probably three, four years, we intend we we would like to see the network doubling as as the shareholders.

59:35 We see there is more space for Domino's. We are the leaders in delivery business, and the new openings we would do still in the in the places where we are dominant in position just to decrease the delivery cost, but also in the in the other smaller cities and towns where we would take the pole position. So so we we see much more space. When you take the the the per capita store penetration that is that we have space to grow when you compare it as compare us with UK or or with other markets. I think there was a Domino's Pizza Enterprises report, I think, two years ago that that shows some statistics of their expectation in the market. So we intend to to double probably within the next three to four years.

1:00:22 We expect that this will be financed with the operating cash flows, but also with some senior debt. You you may you may see that the company today is is is almost debt free from the from the lender's perspect from the senior lender's perspective. There is a loan that that is a shareholder loan that prevailed the transactions. It's a from from us as the shareholders. But but there's no bank funding, and we intend to use bank funding to accelerate growth of the business in the in the following years. I think we were in touch with some of the shareholders, and I represent the largest shareholders. We don't want to be diluted. We see the value of the business going forward, and and we would like to use cheaper sources of capital. And and as you know, that is, especially these days, very very very easily accessible and cheap.

1:01:20 We will be able to access it once we deliver the performance post conversion. That's that's quite key. We are already in talks with banks, but we want to show them how we how we operate in the third quarter. And based on that, we will we will be able to to to kind of advance in those discussions about additional funding. There is a question about well, I'm I'm not going I think we we can allow ourselves to extend this session. It's fine with us. It is important for us so that you have full visibility. So apologies for some of you that have not got answers to these questions within an hour, but we'll continue for another fifteen, twenty minutes, and we'll try to address as many as possible.

1:02:08 So reading the the question about the well, there is a the the the okay. There's a question about how do you see the pizza market in Poland developing? There has been talk about Telepizza willingness to exit. Would you be interested in this? I I'm I'm thinking what what should I say, but I I would say yes. That because we have signed some nondisclosure agreements, so we are not that free to talk. But but, basically, I think this this comment is is correct. I think Telepizza is is probably willing to exit.

1:02:54 But from my perspective, we feel we got the machine right. So as of today, our Domino's Pizza POLAND machine is well functioning, and we think we can expand organically. We will be looking at acquisitions opportunistically. We, a as a as a funds, we are used to it. We we we do m and a. However, looking at the sort of the the business model, we feel Domino's is superior to to that of Telepizza. We we have equipment that was upgraded to meet the high standards of Dominos International. This is high standard in terms of hygiene.

1:03:40 But, I mean, I think that's that standards are probably met by by all participants. You cannot get away with something that that that does not do that. But in terms of the efficiency of the production, in terms of efficiency of the systems, we feel that that Domino's is in the in the pole position, and and we can win the market share without acquisitions. Although, we would be looking at those opportunistically. So that is in the to to address the question from Steven. There is there is another question from Steven about the target sales and EBITDA in terms of percentages and millions of sales. We do not have any intention to give any guidance on 2021 figures for that.

1:04:30 As I said, we we do anticipate significant improvement going forward. The the first half year is still affected by pandemic and start still not showing full potential. But starting from July, we anticipate it'd be significantly improved, but we do not intend to put publish any guidance. Then another similar question like that coming from James. No. We do not intend to to to to present an adjusted positive profit. And, again, question from James about the expected IT system integration to be completed. It was just completed, I think, in the previous Friday. Now we operate if you order pizza in Poland from from Dominium, you will be redirected to Domino's. You get it from Domino's in the branded scooters.

1:05:27 We have paid a lot of attention to meet the standards or even exceed the standards of Domino's International. So so it's it's it's all completed now. We we see the we start to see already the benefits, but it's too early to share statistics because we need to see more than than than than few days or weeks. Then the question, I see Steven is active. When would you expect fund three to be in the realization mode? We are not in a rush as investors. We want to maximize the value. That's that's the key element for us. We see are getting we are getting momentum. We are not in a rush. We are also subject to to lock locking agreements and restrictions, so we are not in a rush. We don't anticipate to to to to to go for it now.

1:06:19 But, of course, we are a financial investor. We we invest with the prospect of exit, and it's not a surprising, probably, statement that we intend to make money. So we we will be striving to maximize the valuation of of of this business. Yeah. And we we we we see some reasons to believe that this would be the case. What happens to the the question from Charles. What has happened to cash balances since the merger? I cannot comment on the very detail because I guess this would give a this would probably breach the the the the restrictions regarding the the RNS because we can talk here about the numbers that were already part of RNS.

1:07:11 I I can only say that cash balances are satisfactory, and we do not need to intend to raise more money. And another question coming from Peter about the bolt on acquisitions for the group in Poland. When do we expect the COVID restriction to be lifted? Zero restrictions. It is gradually happening. It's still not fully the case. So there are system restrictions that apply to dine in. But the most important element is now no longer regarding the restrictions, but it is regarding the the customer behavior and also our our target audience. As as we mentioned already before, but I will repeat this to answer this question, some of our customers are not in markets where we operate.

1:08:05 So students who stay with their families, and they do not they typically would buy our pizza, but they stay with families, and they don't do it because they they are in smaller towns. And and secondly, offices. Still people work a lot from home. And and when we sort of talk around, it seems I mean, we it's clear that people are gradually going back to the office. As I said, I'm calling and participating out of the office, Piotr is in the office as well. But Russia is on holidays, so so the so still the offices are are not full. And we think that probably only in October, we will see the situation coming back to normal oh, normal. So so we'll see more people in the in the back in in in big cities where we operate.

1:09:01 I would use this occasion also to say that with the business model that we currently have, I would say that we are also quite well prepared for any potential additional lockdowns. We think that that there will be next waves probably of COVID, which is unfortunate, but but we do not really anticipate lockdowns. But even if those take place, we think we are well positioned. We now operate a fully integrated business with strong ecommerce, with good pricing, improved pricing. We have fine tuned the or sort of squeezed out the margin out of out of our suppliers. It's also probably fair to say that we we had yeah. I will not comment on the brands, but we changed the soft drink supplier, and we got much better deal out of that.

1:09:49 So in the if there is additional so that there are further waves of COVID, we will be able to to sell more pizza delivery, which we demonstrated we are able to do. And you can see this on the five months performance that even during the COVID days, we have accelerated growth compared to 2020. This this is the strength of the combined business. However, if, miraculously, the COVID comes to an end, then we we see already that also people would be more willing to enjoy dine in, and our dine in part of the business in Dominion will will cater for that. As you could see on the previous slides, even though the dine in was opened, the delivery was holding up, but then customers or tourists coming or moving around will will will enjoy our our dine in.

1:10:44 I don't know whether it's a it's a good time just to cut in and give you a a a small rest. Obviously, we're we're we're mindful of your time. And, obviously, for every question you answer, there seems to be another one or two that come. But, obviously, we can make these available to you post the meeting to enable you time to reflect on some of these. I don't know whether there's any more perhaps that you wanna just pick up on or or perhaps I can hand back to Nick to wrap up on a on a on a final comment. And then I know investor feedback's in Fort Portland, and I can divert investors to provide that for you. Thank you very much. So so I go on from here? Very simply, ladies and gentlemen, thank you very much for making the time. We very much appreciate it. You know, this is a deal a transaction integration that we're very excited about.

1:11:31 We think there are some great prospects which we will look forward to telling you more about in the coming months. But thank you for your attention. We'll do the best for your company. That's great, Nick. And to the whole of the management team from DP POLAND, thank you very much indeed for updating investors this afternoon. Could This will only take a few moments to complete, but I'm sure will be greatly valued by the company. On behalf of the management team of DP POLAND, I'd like to thank you very much indeed for attending today's presentation. That now concludes today's session, and good afternoon to you all. Thank you.