Welcome to the DP Eurasia Interim Results Analyst Briefing. Throughout the call, all participants will be in listen only mode, and afterwards there'll be a question and answer session. Today, I am pleased to present Aslan Saranga and Ilknur Kocaer. Please begin your meeting. Hello. Good morning. Welcome to DP Eurasia's interim results for the period ended 30 June 2022. My name is Aslan Saranga. I am the CEO of DP Eurasia, and I have my colleagues, CFO Neval Korucu Alpagut, and Investor Relations Director Ilknur Kocaer, together with me. Today, I am going to talk about half one highlights, and I will present group and regional overview. Then Ilknur is going to talk about financial results and management guidance. I mean, I hope all of you have our presentation, which is in our internet site. In order to help you to follow up, I will go through this presentation. For you to follow up, I will mention the page numbers. I am starting with our presentation. You can go to page five. In the page five, I'm going to talk about our main focuses in this first six months of our business. On behalf of the board, I'm pleased to report solid earnings growth for the first half of 2022, as we worked hard to combat the high levels of financial volatility in the regions we operate. In order to summarize, first up, we can say there were three important agenda items for the management of the company. Our number one priority, main item in the agenda was store growth and EBITDA expansion. We know that as long as we grow more stores in the long term, we can create more value to our investors and our franchisees. Store margins are very important for us. In order to... If we have good store margins, we know that store growth is going to come. Despite inflation, we have succeeded to deliver strong numbers in the first half of the year. As you will remember, last year we had started a new coffee concept called COFFY. It's going very good, and we have seen quite strong results for this new brand. In this presentation, I'm going to give you more detailed numbers about our new brand, COFFY, how is it going. There are also a lot of challenges in the political and financial challenges in the regions that we are operating, and we are also focusing to manage that. Our priority is, as I said, to stabilize and to take care of our customers and employees, especially in Russia. This performance was enabled by our capabilities, experienced team and culture. I would like to thank my team and franchisees for the first half results. Now let's look at the first half 2022 key indicators. I am now page six. Overall, our net system sales has increased by 11.2%. Before I also start, I would like to note that our Turkish business performance is adjusted with inflation in Turkey according to IAS 29 standard. The numbers are adjusted according to the inflation. Therefore, our net system sales increased by 11.2%. If it was not adjusted, our system sales growth is 66%. For you to understand the gap between two numbers. As I said earlier, our main focus was store growth. We have opened 50 stores, net stores. Actually, we have opened 60 stores, and we had a closure of some stores in Russia. I'll give more details in the coming pages. Compared to last year, we have opened 50 stores. Our like-for-like caught up with the rapid pace of inflation when adjusted for last year's VAT advantage. Our like-for-like in Turkey is -8.4%. I would like to remind you that last year there was a VAT reduction, so that was 7%. When we take out it, our like-for-like is -1%. I want to also say that we didn't lose any order counts in the first half of the year. The minus is coming from our ATV. In Russia, because of the geopolitical tensions and economy situation, our like-for-like has been -2.6%. We have grown our online delivery percentage from 76% - 83%. The growth has been 7.3%. Despite the unprecedented cost pressures, we managed to increase our adjusted EBITDA by 5.6% and adjusted net income by 63.4% compared to same period last year. I will give you also in this presentation more details about how we did that. This is all about the key indicators. Next page seven. I would like to show you the impact of hyperinflation accounting on KPIs. Pre-IAS, our net system sales is 66%, after IAS is 11.2%. Revenue increase, pre is 73%, after 20%. Our EBITDA increase pre is 58% and after 5.6%. Net income increase is 108% pre, after 63%. In the group level, our like-for-like is 38%, after is -6.8%. As I mentioned earlier, the main reason is the VAT reduction of last year. Let's get into the group, the breakdown of our group numbers. When you look at first half 2022 numbers, our net system sales is close to TRY 2 billion. TRY 1.3 billion is coming from Turkish business. Close to TRY 500 million is coming from Russia business. Our Azerbaijan business has TRY 32 million sales. Georgia, TRY 16 million. Coffee is TRY 16 million. I want to also emphasize that our last month sales in coffee was close to TRY 5 million Turkish liras. These are the breakdown of net system sales growth. Like-for-like growth is close to, as I mentioned earlier, Turkey -8%, Russia is -2%, Azerbaijan is 21%, and Georgia is 33%. Now let's look at the overview of our store counts. We have increased, I mean 50 stores. The growth in coffee stores growth, coffee stores have grown from 3 to 15. Our Azerbaijan and Georgia stores has grown from 13 to 15. Because of the efficiency reasons and, you know, focusing on EBITDA, we have closed down inefficient stores in Russia. The number is down to 184. Store number in Turkey has grown from 584 to 628. Our store, corporate and franchise breakdown is as follows. Of course, most of our store openings is coming from the franchisees. The ratio of franchisees is 77%. Corporate stores is 23%. I would like to also tell that, we are opening some of our, store opening in coffee, by corporate stores in order to test different format. We maintain our 30-40 net Domino's Pizza store openings for the end of the year. Actually, as of September, we are close to 30. Thanks to our strong momentum during the first half, we will comfortably deliver 2022 targets. Our coffee network reached 15 by the end of June. Actually, by September now, we are 20 stores in coffee. And we are adding new store concepts that serve different consumer profiles. High demand from franchisees is likely to secure. We'll manage to open 30 store openings, maybe more, for the end of the year. Having been focused on optimizing the existing store coverage in Russia, number of stores stood at 171 by the end of September compared to 184. As I mentioned earlier, we are closing unprofitable stores in Russia. Let's get into more focus on Turkey now. In Turkey, store growth despite inflation challenge. As I mentioned earlier, we have opened 60 stores in Turkey. Twelve of them is to coffee. The franchise share is 85% and corporate share is 15%. Our system sales like-for-like growth has been 51% pre-IAS. After IAS is -8%. In online, our pre-IAS, our online like-for-like has been close to 60% and after it's -3%. I'm now in page 13. Our standing increase in online share is growing, still growing. The share of online sales in Turkish delivery system reached 81%. This corresponded to more than seven percentage point increase over the last 12 months. In terms of COVID and pandemic, the Turkish market is getting normalized. Our takeaway share has come up to 24%. Delivery share is down to 76%, but these numbers are still higher than the numbers before the COVID. We expect the takeaway share is going to go higher in the coming months. I, you know, as you've seen earlier, week-to-week here, our like-for-like is almost zero in Turkey. How did we manage the inflation while delivering store and profit growth? I mentioned this strategy in my previous presentation, but at this time we need to work and combat much harder. Cost price and dynamic pricing has been more detailed. For example, you are seeing on the page 15 on the left upper side. This is our best promotion and the price differences is almost 20% between segments. We have been actively doing this in order not to lose customers, especially in C and B segment. Was that enough? No, because we lost some of our price points, because I mean, the inflation is close to 75%-80% in Turkey. Especially the low income people, their income did not increase that much. Therefore, we come up with two new products. One of them is called Pizzetta. This is like a rectangular pizza. It's like the size in between small pizza and medium pizza, and the price is almost $1. Actually the It's very new. It's in the market only one month and the TV campaign will start tomorrow. We are very excited about this product. The other one is the side item. We come up with really, you know, side items which people can eat next to pizza, and it's really great value. It's like 10 TRY. This is like $0.50. As I said earlier, takeaway business not only in Turkey, but all around the world is growing after the pandemic. These two products will be very helpful to grow our orders and to get more new customers. Because yes, inflation is not good. It's very difficult to combat against profit margin. On the other hand, if we can manage this inflation environment well, as it has been in the previous month and previous year, this could be an advantage for Domino's Pizza Turkey, because many customers are going down to C, D segments. If we can come up with the right product, this could be an opportunity for us. The third one is the targeted campaign, like we call it Pizza Day, Wheel of Fortune. This is really, I mean, we do like 10 days, eight days campaign to really very with a very good offers, with good value offers to increase our orders. Next page is the continuous digital innovation for better customer experience, especially in this six months. We did a lot of new UX changes in our app and web in order to make personal digital marketing to our customers. Because in one part the costs are going up, so in order not to lose customers, we need to make direct marketing. One of them was this notification. The other one is called campaign center. We have sent personal campaigns to our customers. We have seen that this has increased our conversion rate, because if somebody's buying certain promotion and if you send it to them, there's a much bigger high chance that you'll have a better conversion rate. We are able to increase average check price through these new innovations. The other one was the app-only offers, because downloading an app costs us TRY 34, one app. You know, for example, if you are a new customer downloading our app, you are getting TRY 20 off discount on your first order. In order to give you an idea, our app, you know, like-for-like is 112%. It's one of the strongest growth channel in our business, so strategically it's very important to invest on apps. Page 17. For the people who know us, we are very experienced on the operational efficiency from previous years. We did like four big strategic actions for this. One of them was flexible labor management. We get new software. We were able to manage our labor more flexibly, so we have created some efficiency in our labor costs. The other one was the purchasing power. Since we knew that the inflation would be very high, we have increased our inventories more than 140%. Of course, I mean, on the other hand, you will see that our net debt has increased. We believe that's the right strategy and, I mean, we don't see any risk on increasing the net debt since we have the cash and inventory are in our hands. I think we created more advantage compared to our competition by doing this. We had a long-term new partnership, long-term new contracts with some of our strategic partners like Coca-Cola. That gives us a lot of advantage. We also focus on unit economics of franchisees. We try to keep the same margin for the franchisees, and we support them so in order to keep going on opening stores, which as you see is activity. Coffee. Okay. This will be my first presentation, more detailed presentation about coffee. I'll give you some numbers. This page 19 is about the market, coffee market. You know, you may know if you have been in Turkey five years, 10 years ago, Turkey is a coffee market, but people don't drink Turkish coffee there. In the last 7-8 years, by the entrance of Starbucks and some other brands, the espresso coffee business has grown unbelievably. When we check this, you know, profitability of these stores, the cost of coffee compared to pizza, which has been a good profitability opportunity. This is what we have seen in coffee business. Second, we have seen huge growth in the coffee market. Yes, Turkish people drink coffee, but on the other hand, the habits of coffee is changing in Turkey, maybe all around the world. You see the numbers here during the pandemic. Because the cafes were closed, the numbers have gone down. Now 2022 is growing higher than 2019, and we expect, everybody expects that in the next five years coffee market will grow very fast. So who are the big four players in the coffee business? As you have seen, in the last five years, Starbucks has grown from two. Has doubled number of their stores from 265 to 522. They have a successful business in Turkey, and I think it's one of their largest markets. Then there's the Kahve Dünyası. It's called Coffee World in English. This is a Turkish chain. Gloria Jean's Coffees is a Turkish chain. Caffè Nero, you know it from London. It's a popular coffee chain from London. I believe by the end of 2023, we can be the third largest coffee chain in Turkey, because Gloria Jean's and Caffè Nero, we are coming very close to these numbers. These biggest four players owns 37% of total stores. There are of course many, you know, coffee shops like Turkish coffee shops and, you know, like third generation coffee shops. We believe with our digital infrastructure and purchasing power, we have a high chance of being one of the biggest players in Turkish market. Why COFFY is better than the other brands in Turkey? Number one is the simplicity. Our model is about simplicity. You enter to coffee shop. There are only three types, three sizes, small, medium and large. You can buy whatever coffee you want, and the quality of the coffee is no different than other brands. How we do this, how come our prices are better than the competition. It's very simple, because our rents are lower, much lower than the competition. How do you do that? How do you find places cheaper than competition? Because we have a very good app experience and digital infrastructure which the coffee shops in Turkey do not have. With our app strengths, of course we are not in the middle of nowhere. We try to find. We have a lot of experience to find the location. But with the help of the app, we have lower rent margins. We have a 30%-40%, we are positioning our coffee. As I said earlier, it's the same, maybe it's even better quality than competition. What else, you know, good about this model? We have good quality coffee and food assortments. We have very experienced product innovation from our Domino's business, so we are bringing this expertise to coffee also. We have different store concepts for diverse customer profiles. For example, we have started this business with a, you know, 30, 40, 50 meter square coffee concept. Then we opened container shops, and then we have little bit opened 100 and 200 meter square shops. Now we have another, lately we have opened really, you know, flagship store, what you call 400-500 square meters. We are able to to deliver the business model. You know, one of the difficult thing about quick service restaurant business is to have a head office. You know, you need a lot of stores to cover your head office cost. We are using the shared services of DP Eurasia. That's another advantage. We have a franchise management know-how and franchise infrastructure. We have our own online ordering platform, which is much better than the competition. Let's look into the numbers of coffee. As I said earlier, first half we finished 15. We are right now 20, will be high chance higher than 30 stores by the end of the year. Same-store AVOS is 89%, like-for-like. But this is only three stores, because us, you know, what we call same stores is two years and old stores. Average AVOS for all stores is around 75,000. If you look at page 21 on the right, you know, below, you'll see the coffee KPIs. Average investment for one coffee shop is TRY 1.2 million-TRY 1.5 million. Average AVOS is TRY 75,000. Our average MVO is 2,500 orders. Average ROI is 2.5 years. All of our stores are under three years, some of our stores under two years. Every store margin is 12%. System sales is, as I said, for the first half, TRY 50 million. We are doing, last August we did TRY 5 million of sales in coffee. That's all about the coffee. About Russia, our priority remains the well-being of employees and customers. Our like-for-like growth has been - 3% and - 2% in online. Our online system sales has grown up in delivery to 94% in total, so from 74%-75%. We had a negative like-for-like by the end of first half. In Russia, we face into a strong comparable period while operating in a difficult geopolitical and economic environment. Last year, as you may remember, our like-for-like was 18%. As previously announced, the group continues to limit investments into the territory, and it's focused on optimizing the store cover, store coverage in Russia. Number of stores stood at 171 by the end of September, compared to 184 stores by the end of first half of year. We continue to monitor the situation in the region closely while the safety and welfare of all the group's employees and customers remains our primary priority. Thank you for listening to us. Now, we will have the financial results. After that, we can take the questions. Yes. Okay, thanks, Taha. Hi, everybody. Neval Korucu Alpagut speaking. Now I will take you through the financial details. Before starting also I will emphasize once again our numbers are adjusted with hyperinflation IAS standards. Unless presented otherwise, all the numbers that I provide here are revalued or restated. Now we are on slide 24. Group system sales were up by 11.2% to TRY 1.9 billion in first half. This reflects the healthy growth at the group level and was stacked against very strong comparative. Adjusting for last year's VAT impact, we would have around 18% system sales growth. Group adjusted EBITDA grew by 5.6% to TRY 153 million. EBITDA margin as of revenues was at around 12% compared to 13.9% of last year. Margins at group level mainly impacted by Russian business. As I will explain in the next slide, Turkish business margins remain intact. Cash conversion ratio stood at similar levels despite lower CapEx, as EBITDA excluding IFRS 15 declined compared to last year. We move on to the next slide 25. Turkey system sales, which includes Azerbaijan and Georgia, along with coffee, declined by 1.5% to TRY 1.4 billion. Adjusted for last year's VAT impact, we would have around 6% growth in system sales in Turkey. Turkey adjusted EBITDA was up by around 10% to TRY 152 million. EBITDA margin recorded a small increase to 16.6% as store sales performance created a good operating leverage despite unprecedented cost pressures. The group took the advantage of its robust purchasing power and also built up additional inventory during the period to combat with the elevated food costs. The later action was also the main reason behind the higher net debt position, as we will explain in the next slide. Thanks to solid EBITDA generation and controlled CapEx, our cash conversion ratio increased to a healthy 71% from last year's 65%. Please also note that our first half CapEx in Turkish business is in line with our full year guidance of TRY 90 billion. The next slide 26, is on DPR financials. System sales in Russia was up by 77% in Turkish lira terms. In ruble terms, there was 7% contraction. This was due to both strong base of last year and also prevailing tough trading environment. EBITDA of Russian business was up by 8% to TRY 14 million, but the margin declined to 4.1% from 6.3% due to relatively weak operating leverage. As I've already underlined our unchanged stance in Russia, we see the investments limited and another big opening next store. Our maintenance CapEx is around TRY 19 million during first half, which was approximately RUB 95 million. So this is also in line with our overall full year guidance for Russia, which is RUB 190 million. Next slide 27, is on our leverage position. As you can see, in pre-inflation accounting terms, our net debt increased by 42% to almost TRY 1.1 billion versus end of 2021. Most of the increase came from Turkish lira devaluation, while higher working capital also contributed. We took a strategic decision to build up additional inventory to mitigate higher food costs, which in turn helped us to defend our profitability. Looking at leverage ratio, this time we also provide a tax-neutral net debt ratio to strip out the impact of extreme currency volatility during this last year. In pre-inflation accounting terms, our net debt to EBITDA increased to 4.1x from 3x. However, assuming the exchange rates stayed at 2019 levels, we would have a leverage ratio of 2.6x in tax-neutral terms. With inflation adjustment, our net debt to EBITDA ratio stands at 3.8x, while it drops to 2.3x adjusted for currency volatility. We expect this ratio will improve by the end of the year, but of course, depending on Turkish lira/ruble exchange rate and inventory levels. On slide 28, we give some details on the composition of our loan book. Please note that the group does not hold any hard currency debt position. We think that is very important. 64% of bank borrowings are in Turkish lira and rest is in ruble, which also matching with the group's revenue composition as 73% of revenues are denominated in Turkish lira and 27% in ruble. This positioning works as a natural hedge for our balance sheet. In an increasing rate environment, almost 90% of group's bank borrowings have fixed rates, whereas average maturities stood at 2.6 years. The group has TRY 268 million cash and access to an additional banking facility of TRY 157 million. On to slide 13, management guidance. As you may remember, management reinstated 2022 guidance in our trading update of 21st of July. The group continues to trade in line with this form of guidance. To recap our pre-inflation accounting LFL guidance is at 55%-60% for Turkey. For Russia, it's basically flat as in ruble. Domino's Pizza net store openings expected to be around 40-44 Turkey. Strong momentum continues driven by our solid franchise demand. For Russia, more store opening activities planned as previously stated. COFFY represents an outstanding growth opportunity for the group as Aslan Saranga also already underlined. Thanks to the strong franchise demand store openings for coffee continues at a good pace in the second half. Total store count by the end of the year could exceed 30. It will be close to our higher end of our guidance. I already went over the CapEx development in Turkey and Russia, and as I said, they're well on track with the guidance. From here, I leave the floor to Aslan Saranga for conclusion remarks. In order to summarize what we have talked number one, our strategic actions have effectively alleviated the impact of inflation. We delivered 5.6% inflation adjusted and 53% net income growth compared to last year's same period, despite unprecedented cost pressures across the board. We opened 29 stores during the first half of the year from January to June, including COFFY and Azerbaijan and Georgia. Our commitment to keeping the store profitability at healthy levels is drive further store expansion. High growth potential from COFFY business, which has delivered solid unit economics and opening continue at full speed in the second half on top of existing 15 stores. We expect to reach above 30 stores by the end of this year. In Russia, we remain focused on store network optimization and efficiency. The business will continue to operate in a subset state manner. Thank you for listening to us, and if you have any further questions, we are happy to answer. Thank you. If you wish to ask a question, please dial zero one on your telephone keypads now to enter the queue. Once your name's been announced, you can ask your question. If you find it's answered before it's your turn to speak, you can dial zero two to cancel. Once again, that's zero one to ask a question or zero two if you need to cancel. There'll be a brief pause now while we register any questions. Okay. Just as I'm saying this, we've had one question come through now. That's from the line of Anubhav Malhotra of Liberum. Please go ahead. Your line is open. Hi team. I just wanted to ask a couple of questions on the COFFY brand. Can you give us a color of what do you think the size of the opportunity is in the long run in terms of the number of stores? I don't know if you have done any work around it yet or not. Then secondly, on the business model, can you give us a bit more clarity on what kind of royalty on marketing fees do you charge to your franchisees or plan to charge, or is it not something that you want to share at this moment? Thank you. Yeah. Thank you. As I said earlier, as the number of stores grow, we give more numbers to our shareholders. I think it's very early now to comment on a long-term business plan for COFFY. I want to come to this level of 30-40 stores. Maybe in our year-end results, I can give more information about our long-term store growth. About the royalties, we take $10,000 from the franchisee and 4% for the royalties. At the moment, we didn't stop it. At the moment, we have a system that if the franchisee is not in certain sales level for the brand review, we are getting less royalties. Right now, almost all the franchisees are paying 4%. We have 2% for online orders and marketing. 2% marketing funds. This is the franchise conditions. Thank you. That's very helpful. Thank you. Once again, if there are any further questions, please dial zero one on your telephone keypads now. We have a follow-up from Anubhav Malhotra of Liberum. Please go ahead. Your line is open. Hi guys. Can I just ask on Russia a bit more? I mean, in terms of you clearly scaling back the operations there at the moment. If I look at long-term opportunity that you had previously disclosed, 1,200-odd stores, I think you had mentioned in the past. Do you think that opportunity still exists? Or do you think competition is moving faster than you at the moment, and you're losing some part of that opportunity? You want to remain a smaller player, but a more profitable player in the Russian business and focus a lot more on the coffee brand, where you think the opportunity is bigger? Just on the strategy there. Thank you. There is, for sure, a big uncertainty about the Russian market, right? Nobody knows when this war is going to finish and when the sanctions are going to finish. I think, you know, on the one hand, if we come to normal, Russian market is a huge opportunity. There is a huge uncertainty now for us. Yes, I mean, we are going to focus more on our coffee business and actually our Turkish business is growing faster than you know 2-3 years ago. You know, last three years we have opened more than 50 stores every year. Coffee business clearly is a huge opportunity, at least for the next year. I can tell that we'll focus on these two opportunities for our business. We'll try to keep Russian business self-sustained. All right. Thanks, Anubhav. On your debt position at the moment, are you as uncomfortable with the amount of debt you have given that I know it, there's a currency translation impact on it? Yeah. You still have. Yeah. Decent leverage of over 2.5x. Yeah. Is it something you're comfortable with? Or is it a plan to, as you grow, keep growing and generate more free cash flow to pay back that debt and reduce it over time? Because inflation rates in both the markets can be quite volatile, going forward. Thank you. Yeah, you are right. When you look at the leverage numbers, it's little bit higher than our historical core performance. I believe this number will be better by the end of the year. As a business strategy in this high inflationary environment, our strategy is to buy, you know, bigger stocks with a cheaper price, and that strategy worked very well. We have also some extra cash, you know, to keep the company comfortable. This is our business decision and yes, I feel comfortable, you know, whenever it is needed, we can decrease to a lower level. You know, and our growth is more dependent on franchise growth. Yes, as the things will get better with the inflation and as we open more stores, I believe our leverage ratios will be much, much lower than what has been in this year. All right, great. That's very helpful. Thank you. Those are all my questions. Thank you. Currently we have no further questions in the queue, so I'll hand back to our speakers for the closing comments. Thank you for listening to us, and hope to see you in our trading update. Thank you. This ends this conference. Thank you very much for attending. You You may now disconnect your lines.