Picture supply: Domino’s Pizza Group plc
DP Poland (LSE: DPP) shares rose 9.9% Thursday (27 March), bringing their one-month achieve to 13%. The five-year return is 82%, although it’s been a predictably bumpy experience for this penny inventory.
DP Poland is the operator of Domino’s Pizza shops and eating places throughout Poland and Croatia. What simply despatched the share worth up? And does the information make me need to make investments extra money?
Strategic acquisition
Yesterday, the agency introduced that it had acquired Pizzeria 105, the fourth largest pizza restaurant model in Poland, for round £8.5m. Pizzeria 105 is a franchised enterprise that operates 90 areas throughout the nation.
CEO Nils Gornall commented: “This acquisition fast-tracks our transition to a predominantly franchised, capital-light mannequin, with over half of our shops set to be franchise-operated from completion. By welcoming 76 skilled franchise companions, we develop our presence into 31 new Polish cities.”
Pizzeria 105’s most important supply of earnings was gross sales of products to its franchisee companions and royalty charges. The founder will stay a shareholder to make sure a clean transition and convey priceless native experience, the client famous.
Lengthy-term plans
DP Poland says Pizzeria 105 is worthwhile and the deal is predicted to be instantly earnings enhancing from completion.
That stated, the numbers are fairly small right here. Income was £1.7m final yr, with £1m in EBITDA, from £30.8m of system gross sales on the franchised shops. However DP Poland says they’ll profit from Domino’s model and advertising and marketing assist, which is able to present a path to drive a 56% larger order rely.
The deal additionally accelerates the corporate’s plan to have 200 Domino’s shops in Poland by 2027, with half of the retailers franchise-owned. Long run, the corporate goals to have 500+ areas in Poland. Croatia is a a lot smaller a part of the enterprise for now.
Nonetheless loss-making
In 2024, like-for-like system gross sales grew 17.9%, marking the third consecutive yr of double-digit development. Earlier than this acquisition, the agency was tipped to extend income to round £65.8m this yr, good for 23% development. A primary revenue is perhaps additionally eked out.
Nevertheless, whereas latest reductions in internet losses and enhancements in EBITDA point out a constructive trajectory, DP Poland hasn’t but formally achieved internet profitability. On the finish of 2024, it had £13.4m in money and was debt-free. However the truth that it’s nonetheless loss-making provides some threat right here.
Additionally, new shares are being issued as a part of the deal. Additional shareholder dilution can’t be dominated out.
Ought to I order in additional shares?
This acquisition matches in properly with the corporate’s plan to show Domino’s into the main pizza model in Poland. So I feel it may develop into a sensible transfer.
Not like many components of Europe, Poland’s financial system is rising strongly. GDP development was 2.9% final yr, beating forecasts, and it’s anticipated to speed up to no less than 3% this yr, then 3.6% in 2026. That’s a supportive backdrop for shopper spending, eating out, and pizza deliveries.
If the corporate continues taking market share and turns worthwhile, I feel the inventory may commerce a lot larger than 10p within the years forward. For context, the market-cap at the moment is simply £92m.
Given the dangers although, I’m going to maintain this as a small however doubtlessly high-reward holding in my portfolio.
