Given the pressures facing leisure spending, Aim-traded pizza and pasta chain Prezzo posted a surprisingly strong recovery in the first half. Wayne Brown at Altium Securities estimates that only 3 per cent of the family-run company's 11 per cent sales growth can be attributed to the restoration of VAT to 17.5 per cent. The rest was down to a rise in customers and five new restaurant openings. Moreover, because Prezzo has a high fixed-cost base, most of the top-line growth fell straight through to profits.
The company has accelerated its expansion since June. It has opened four new sites and bought 11 leases in crowded locations such as Cambridge and York from Caffè Uno for £3.1m - its first bolt-on acquisition. It will convert most of these into Prezzo restaurants, but will retain one revamped version of Caffè Uno (it also bought the brand licence off current owner Paramount Restaurants for an undisclosed sum) to see if it makes strategic sense to develop a more casual all-day brand alongside Prezzo.
Finance director Alan Millar shrugs off talk of slowing discretionary spending in the UK. "We've not seen any signs of weakness so far," he affirms. Broker Evolution expects full-year adjusted pre-tax profits of £13.5m and EPS of 4.1p (£12.3m and 3.7p in 2009).
PREZZO (PRZ) | ||||
|---|---|---|---|---|
| ORD PRICE: | 50p | MARKET VALUE: | £113m | |
| TOUCH: | 49-50p | 12-MONTH HIGH: | 51p | LOW: 27p |
| DIVIDEND YIELD: | 0.4% | PE RATIO: | 15 | |
| NET ASSET VALUE: | 27p | NET CASH: | £11.8m | |
| Half-year to 27 Jun | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2009 | 43.7 | 5.1 | 1.6 | nil |
| 2010 | 48.4 | 6.0 | 1.9 | nil |
| % change | +11 | +18 | +20 | - |
Ex-div: na Payment: na | ||||
