Picture supply: Domino’s Pizza Group plc
Discovering and investing in market-beating penny shares can assist increase a portfolio. As a result of small market measurement of those companies, an uplift in investor curiosity can rapidly ship their share costs rocketing.
Conversely, resulting from their typically restricted monetary sources and income (if any in any respect), they’ve the potential to crash and burn. Simply because a inventory’s 10p, it doesn’t imply it may well’t fall to 5p within the blink of a watch!
One 10p penny inventory in my portfolio is DP Poland (LSE: DPP). It operates Domino’s Pizza shops and eating places throughout Poland and Croatia.
Value barely a few hundred quid, that is at present my joint-smallest holding. I first opened a place again in November, with a view to purchasing extra shares if the agency reported encouraging full-year outcomes.
On 16 January, DP Poland launched a buying and selling replace for 2024. Right here’s what I favored about it.
A yr of progress
For 2024, the corporate expects to report whole system gross sales of £55.4m, which might be a roughly 24% soar over the yr earlier than.
In Poland, gross sales grew 15.9%, with a notable improve of 8.2% in This fall. Like-for-like (LFL) gross sales rose by a powerful 17.9%, pushed by a 20% rise in deliveries (one among Domino’s’ key strengths). This was the third consecutive yr of double-digit LFL development.
Common weekly orders reached a file 827 for the yr, a 13.2% improve. In the meantime, 12 new places had been opened, 4 underperforming ones closed, and one other three are set to open this month. The agency ended the yr with 113 shops throughout Poland.
In Croatia, the place it at present has a a lot smaller presence, whole system gross sales elevated by 40.2%.
CEO Nils Gornall commented: “2024 has been one other yr of excellent development for DP Poland, reflecting our continued deal with execution and operational excellence. With an expanded and optimised retailer community, the initiation of a franchising mannequin, and a debt-free steadiness sheet, we’re assured in our capability to capitalise on the alternatives forward.”
The important thing takeaway right here (pun meant) is that individuals in Poland and Croatia, like many different locations around the globe, are actually liking their Domino’s pizzas.
Some issues
Nonetheless, I do see a few dangers right here. First, a return of inflation in Poland might heap stress on customers, resulting in lower-than-anticipated gross sales. Within the second half of 2024, inflation there fell 3.9%, however that is value monitoring with a possible international commerce battle looming.
Additionally, the agency isn’t but worthwhile, although it’s getting nearer. It achieved constant adjusted EBITDA profitability in Poland for the primary time final yr. But it surely’ll have to generate precise bottom-line income for the inventory to essentially do properly in future.
The excellent news is that the corporate’s shifting in direction of a franchising mannequin, with the switch of 5 shops to new franchise companions in 2024. This transition’s anticipated to speed up this yr, which is encouraging as this capital-light mannequin has the potential to considerably increase revenue margins.
I’m ordering in additional shares
DP Poland’s debt-free and intends to open lots of extra Domino’s shops below a franchising mannequin. It has a modest £99m market-cap, translating into an affordable price-to-sales a number of of 1.9.
I plan to considerably improve my place within the coming weeks.
