DP Poland Plc (DPP) Earnings Call Transcript & Summary

Good afternoon, and welcome to the DP Poland Half Year '26 Investor Webinar. We're delighted to have with us today Lukasz Ostrowski, the CEO; and Edward Kacyrz, the CFO. Before we start the presentation, I'm just going to go through a few admin points for you. Firstly, you'll see a poll on your screen. I wondered if you could complete that. And today's webinar will cover the half year '26 results followed by Q&A. Following the meeting, you'll be redirected to a short survey. We really appreciate it if you could spend a few moments completing that. [Operator Instructions] We've had a few questions ahead of time, and we'll cover all questions at the end of today's presentation. I think that's all the admin points addressed. I'd now like to hand over to Lukasz to start today's presentation.

Good afternoon, ladies and gentlemen, and thank you very much for making time joining our presentation. In the next 20, 25 minutes, we are going to cover the half year results, which is pretty standard for this presentation, and this is what you expect. But it's also my first time that I have the opportunity to be with you. So as a new CEO for DP Poland Plc, I'm also going to share a couple of insights from my start. So let's click and what you see on the screen in a second is the bio of speakers that are going to speak with you today. And later, when you receive the materials, you can, of course, read more details about us. And if you have questions in the meantime, please put them into the chat. But apart from the bio, the more interesting and probably much more thoughtful question is, from my perspective, why I have joined DP Poland, why the time is good now, and why I'm fit for the role. So in terms of why this, why this opportunity, there are three main reasons. One, this is a very big opportunity from a commercial perspective. And this is something that I recognize. This is something that many of you recognize us, the shareholders or people with interest in DP Poland, but it's also recognized by The Domino's International, where they put the DP Poland and Poland as one of the top eight growth markets that they focus on and put extra support into those markets to facilitate the growth. The second part, what I joined is that Domino's is an amazing business model. Every pound, every policy that we put into the business and the operations creates deep and wide moat against the competitors, that is more and more difficult to come -- to overcome from their perspective. And on the third part, last but not least, there is a big tech opportunity from our perspective that we see on the market, that I see on the market to continue on the path of developing with the technology and gaining momentum and creating even more advantage and unlock more growth via the tech. From that perspective, those elements that I just described, they are true today, they were true a couple of weeks or months ago. So then the question is why the timing is right from my perspective to join the company. And the short answer is that I believe that we are on the cusp of accelerated growth on the back of 105 integration, on the back of franchising and on the back of having -- being around the time of a tipping point for the explosive growth in the market. And last but not least, I feel I'm a good person to pick up the baton, as I have 25 years of experience scaling businesses. I have a lot of food experience as IKEA as a business where I spent quite a lot of time. There's a sizable chunk of business that is done in food. So I know the category. And also, I have quite significant experience working with franchise partners in my previous jobs. And last but not least, there's also quite a lot of big wins that I have under my wing from customer-facing technology development like e-com, like CRMs and so on. So if we zoom now into what are the first findings and what are the main priorities is that the starting point is good and solid. Now it's about creating the scale and the momentum. And there are two priorities that we put in front of ourselves that I put in front of the organization. One is to create more profitable orders. So to create more demand. And second is to unlock the franchise-led growth, which practically means prioritizing integration of Pizzeria 105, shift in the corporate store sales and lowering the entry for the new franchisees. And one of the questions was around this lowering the cost of entry was about whether -- are we going to lower the experience or lower the quality of The Domino's stores when we lower the cost of entry? And the answer is absolutely not. As you know, there are many ways of executing the same retail QSR concept, and we are now turning every stone to find those lower costs, and there's quite a lot of successes into that. So from the starting point perspective, now the starting point is solid. We need to create momentum and from the solid base. And the two main priorities is the profitable orders and unlocking franchise led growth. So now let's zoom into those two priorities starting from a big picture, reconfirming that the direction where we are going is unchanged, which is roughly 500 stores in Poland, predominantly franchise with an attractive economics for our partners. By having this vision and this direction clearly spelled out, we can also have clarity in terms of different roles that DPP has and also franchisees have in the system. From our perspective as DPP, our objective is to create the demand to build the brand to secure the supply chain and to operate a proven Domino's concept. From a franchise role is to lead the local execution, produce amazing products and deliver them in less than 30 minutes. So the split of the roles is simple and clear. And when everybody knows what to do, then there is a lot of energy that can be unlocked. Now let's move into the first part in the order density. Edward over to you.

Thank you. Hello, everyone. As Lukasz said, all the density and the top line is one of the things that is crucial for the business expansion. When we're talking about the auto density just the order by itself, whereas also the flow or the final of the new customers approaching We have some successes here because the growth is strong double digit close to 20% year-on-year for the first half of the year. At the same time, we do not give up with the frequency. It's a kind of a stabilization now here. But it is connected with some pressure around the convenience sector. I think we are coming up now with a very nice idea how to prevented and how to differentiate from the others, so that the perceptions of the grant is better forward. And with regard to the ticket value, that was one of the elements that for a couple of years were not our main focus because we drove for the order. Now the profitability is also within the closer look of our interest. So looking forward, ticket value together with the volume and the growth of the consumers will be crucial for the business.

Now if you look into how to create more demand, how to increase the order density, there are four main pillars that are behind that priority. One, we -- as we speak, we work on the new app and the new website. By the end of this year, it will be up and live. And this will create better conversion funnel, creating more orders out of the same demand. And for sure, it will also have a effect to facilitate and to make it easier for people to come back and to create even more demand. So that's one. Second is also a carryout proposition, which is when we look on our business, we see that the delivery business works like a -- It grows, everything is good. From a carryout perspective, we see a bit more challenging situation with a lot of competition around us who also focus on the carryout and on-the-go proposition. That's why we are reviewing our portfolio, preparing the offer. And within the next couple of weeks, we are going to be out in the market with a new approach to our carryout offers, and we are going to drive increased performance on that part of the business to contribute to overall growth. And then the third and the fourth that you see on the bottom of the page, they are much more connected with our pricing and customer segmentation, meaning how -- what we offer, how we offer, what are the price points, how big is the gap from one size to another size. And to -- by segmenting our customers in much sharper way, we can also talk with the offers and prepare the offers in our that are much more tailor-made and much more recognizable by different targets. And by doing so, to increase the number of orders. Of course, as a side effect, it can be also a higher ticket, but that's a secondary target, primarily to have more orders. But also to have easier and much sharper communication in the market, so that there's more people on the top of the funnel and the conversion rates are better. So overall, up and web, carryout and a lot of work around many pricing and working from a consumer segmentation towards the offer, not from the offer to hope to catch different segments.

Okay. Okay. So let's move for a while to the franchise organizations and the reasoning behind it. As we spoke. We see that the selections of duties between the headquarters, The Domino's and the franchisees brings a lot of success. So -- on the bottom left side of the slide, you can see that the parameters, the KPIs of the franchisers are simply better than the source. This is driven mainly by the better focus to the business by the better operations and closer cooperation with the consumers. This approach conventions to the franchise led organization as well as drive the top line to grow give the possibility to focus on right things. The Domino's as corporate is focusing on the brand technology and demand. At the same time, the franchisees is concentrating on serving the consumers the best day-to-day way as he can. And with this approach, we are eliminating bad costs from the overall business profitability, and we get the momentum to underpin expansion. Why we believe this is a very doable for the coming months and years, because so far, we see already a lot of success. Starting in 2023, we just had a 7% of our portfolio being franchised. For midyear of 2026, we landed at 38% in Poland franchises and 40% as a group. And by the end of the year, we believe that there is a chance to be very close or just up 50% of the franchise network in Domino's Poland. That gives us also the perspective for the next year just to speed up and become the franchise organization as soon as possible. Over to you, Lukasz.

Now under the franchise late organization, certainly, there is one big priority that is one of the major priorities for us at hand is the conversion of Pizzeria 105 project. And there was also a question why now it's slower, and I will answer that in a second because basically, what is the situation? We converted 18 stores, and we see that, overall, the conversion works. We create an order uplift of roughly 20%, which is good. From our perspective, we, of course, want more, but 20% is decent. Now the issue that is behind this 20% is that we have a very significant spread of performance. On one hand, we have to close a few stores that were not able to operate under Domino's, which is very unfortunate. On the other hand, we have the best franchisees that are already raising hands saying they want to open another domino store. So the spread is big. And from that perspective, we have to slow down a bit to the group to understand why the spread is big and how we organize ourselves going forward. And the root cost for the spread is that we were too ambitious approaching the franchisees. And this is something that I discovered when doing the stores in the last couple of weeks talking to 200-plus people understanding different viewpoints and different experiences on the ground with different partners. The 105 converted our corporate stores, our franchise stores that used to be Domino's stores. And then the conclusion from those conversations and the experience from the converted 105 stores is that we basically asked too much in too short time of the converted stores. We asked from Friday to Monday, almost to stopping 105 and start being full Domino's, learn how to work with the fresh food with inventory ordering with the deliveries that are coming, the labor and the workforce and the hours and the labor cost management that's connected with the deliveries and so on and so on and so on. So some of the operators were able to catch everything and convert it into an amazing success. And for some of them, it was just too much. So our way forward is that we are catching the 105 partners where they are. And we are taking them in towards the full-fledged Domino's experience in a couple of steps, starting from introducing our product, our ways of working with the product, with inventory, et cetera, and then gradually moving towards like a full blast Domino's experience. From that perspective, you might think, "Oh, so does it mean it will take longer." For some people, it might take a bit longer. But we believe that like with any learning, when you split the material and have a proper pace than actually learning the material and applying that in practice is much faster than trying to do everything in one go. So that's the essence in terms of the Pizzeria 105, and we are positive and optimistic that we can move forward pretty fast. Now from our perspective, looking at the Pizzeria 105, it's super important. It's a task at hand that we have, and we put a lot of energy now into restarting those conversions and moving forward, yet this is not the end goal. Our end goal is, as you've seen a couple of slides before, is 500, roughly 500 profitable stores in Poland to fulfill the market potential. To be able to achieve that, we focus on the new engine to unlock the new engine, which is new franchise openings because that is the -- something that after 105 is important for us to develop and to move forward. And then from that perspective, if we want to fulfill the market potential and have a significantly higher amount of location stores and footprint in Poland, the key-key topic for us to focus on and to move forward with is to lower the cost of entry. Of course, there's other topics that you see on the right-hand side, but one of the corequisite is to lower the cost of entry. And as we speak, we are investigating significantly, a significant amount of energy and resources into turning every storm and looking into every element of our standard stores to find out how we can lower those costs. I cannot share all the details now, but what I can assure you that we find a really material and meaningful changes that from a customer perspective, deliver the same experience. Domino's is The Domino's, yet we are able to execute that at a significantly lower cost. One of the avenues that we explore is also to look inside and use the big family, The Domino's family. And we look across different markets, on solutions and ideas that other markets applied when they were on the same journey as we are today. And we see that there's a couple of ideas that have been executed in other markets and there are ECB replaceable, I mean is transferable to Poland. And that can create even more and even more reduction in cost of entry. And again, I'm only a couple of weeks on the job, so it's too early to share all the details, that will be shared as soon as we have clarity. But what are the preliminary findings showing us that there is a significant and material difference versus our current cost base to open the new store. So if you were to sum up, and -- maybe before we sum up, but -- because there I see that I forgot to touch on one of the questions that was already shared, which is the question whether are we selling only on the installment or are we also selling some of the corporate stores in cash. And then the good news is that now we start to see the sales that is coming not only in installments, but also for cash, from full cash to half cash to only small prepayments, but we see the energy of potential partners significantly higher than what the team has been sharing with me was happening a year or 2 years ago. So now there's a number of people raising hand and willing to go with us on the journey believing in The Domino's concept, that translates also that they put the cash forward. So the short answer is, yes. We see already some sales of the stores in cash. And now if we come back to the summarizing in terms of my priorities for DPP. This is order density, creating more demand, web up carryout offers and working with the portfolio and targeting. Converting Pizzeria 105 by taking a staged approach and catching people where they are and converting the corporate stores into franchise led stores. And last but not least, to open the credit novel of the new openings by lowering the cost of entry and having an attractive offer for the partners. Now I would like to close with the answer to one of the other questions also that was shared before the meeting. Well, I'm going to do different the needs. And I want to share two perspectives. One that I'm super proud to step into the shoes of Nils, what means -- with the management team created in the last couple of years, this is a really solid base in terms of the operations in -- and creating the prerequisites for the growth. So that's super good and comfortable position for me to step in. And I would like to thank Nils for doing that. And on the other hand, from my perspective, there is much more focus on systems, on repetition and on simplifying how we approach things so that we create the snowball effect. And much more focus on the top line, on the order density via tech and via things like CRM. So those are going to be different actions and different focus of the energy, again, building on the foundation and solid base that means with the management team created. And with that conclusion, I would like to close the presentation and open up for any questions that might come up on the way. Thank you.

Great. Thank you, Lukasz. Thank you, Edward. And as Lukasz said, we are now going to take questions. [Operator Instructions] And Lukasz, just a general one to start that's come in, which is about the market in Poland, which is the Polish people and 88 pizza and how do -- how much are they in relation to other nationalities?

Probably that's the question to me, if you don't mind.

Yes, go Edward, go.

Yes. So very simple and short answer is, yes. If we look at the structure of the QSR business, Pizza is the most chosen product on the market. And after pizza is and then Burgers. Burgers like McDonald's on the third position. Unfortunately, McDonald was in Poland in [ 89 ], not in when Domino's joint. So therefore, he built such a strong position, but we can catch up with it. So this is a very good information. People eat pizza. The second good information is that QSR business and limited service chains are growing faster than the pizza sector in Poland. And at the same time, we have a lot of room for integration and consolidation of the partners because more than half of the business in Poland is still fragmented and divided between private owners. So from that perspective, I would say that we see it on a big market with a growing potential with the fragmented structure, which gives us a lot of opportunity to grow and expand.

Okay. This is a question I think you've answered partly before, Lukasz, but there's a second part to answer here, which is, are you managing to sell any franchisees for cash? Or are you still lending the purchaser for money -- any money and have any early sales being refinanced -- we've been able to refinance the loan with the commercial bank yet?

For the second part of the question, for the refinance, I have to look at Edwards. That's something that I haven't investigated yet. The first part of the answer of the question, the answer is yes, we are able to sell for cash and partially some of the stores. Edward, for the refinancing.

Yes. For the second half of the question, we have two franchisees right now in the pipeline that are at the very final stage of getting the bank loans with preferred times for the businesses that they are taking over. Some of them that for some different reasons, cannot get this bank loans, they are paying in advance for the installments, they have normal according to the schedule paid in the future. So this is also a good position because it means that the franchisees and more than expected and they are able to pay the capital earlier than expected.

Okay. Again, I think you answered some of this in the question, but let's just make this clear. If you lower the cost to open a franchise, will this have an impact on the brand?

So short answer is no. And the reason why I can say this with confidence is that the starting point is to keep the brand experience, product experience and product quality. And look for the ways to lower the cost, where there is no added value towards the customer. So no, we are not going to lower the quality or the experience for the customers.

Okay. A question that's coming here is my main issue is given the valuation differential with other listed Domino's companies. Is or how could management -- do management have plans to improve the liquidity and the share price? And is a dual listing worth considering or just too costly?