Prezzo Plc Preliminary Results for the year 1 January 2012
Chairman, Michael Carlton made the following statement on the preliminary results.
Prezzo has continued to expand its representation throughout a range of locations across the UK in 2011 and I am pleased to announce another set of impressive figures with adjusted* pre-tax profits up 14% to £16.4m (2010 – £14.4m).
Results
For the 52 weeks ended 1 January 2012, revenues increased 18% to £123.9m (2010 – £104.8m) and gross or restaurant profit increased 15% to £18.7m (2010 – £16.2m).
Adjusted* EBITDA increased 17% from £18.8m to £22.0m and adjusted* operating profit excluding non-trading items increased by 14% from £14.4m to £16.4m.
Adjusted* pre-tax profit increased by 14% to £16.4m (2010 – £14.4m) and after a £0.3m (2010 – £0.4m) charge for non-trading items (see details in note 6) stated pre-tax profit was £16.1m (2010 – £14.0m).
The effective tax rate for the period has been calculated at 27% (2010 – 30%). Adjusted* diluted earnings per share were up 18% to 5.21p (2010 – 4.43p) and diluted earnings per share were 5.09p (2010 – 4.27p).
Estate development
We opened 27 new restaurants (2010 – 26), acquired 9 restaurants (2010 – 11) and closed 2 (2010 – 3) restaurants during the period. Four of the openings were acquired in 2010 and six of the 2011 acquired units were refurbished and re-opened during the period. The remaining three units acquired in December will be refurbished as part of our 2012 opening programme. The overall number of restaurants in the estate at the end of 2011 was 184 (2010 – 160).
Our openings included prime city centre locations in Edinburgh, Manchester, Canterbury and York. We also increased our presence within suburban London with openings in Belsize Park, Mill Hill and Eltham and continued to have successful openings in regional towns such as Bishop’s Stortford and Rugby.
In our existing estate, 12 (2010 – 18) substantial refurbishment projects were completed ensuring that our restaurants retain their fresh and stylish interiors. We also purchased seven (2010 – five) freehold properties, taking our freehold portfolio up to 22 (2010 – 15) properties.
Our development pipeline for 2012 is exciting. In addition to the three units we acquired in December 2011, we have opened a new central London operation within the redevelopment of Kings Cross railway station and there will be openings in Bath, Bristol and Cobham. We also have increasing confidence in our Chimichanga Tex-Mex concept and after adding two more successful units in 2011, further planned openings in 2012 will take us forward to the milestone of 20 branches trading.
Taken together with other opportunities that we are progressing, we would once again anticipate opening around 20 new restaurants over the course of the year and we are also developing the supporting infrastructure across the business to equip us for further sustained growth in the medium term.
Cash flows and financing
Net cash flow generated from operations was 37% higher at £22.1m (2010 – £16.1m), however, as we noted a year ago, we estimated that the closing cash position at the end of 2010 was approximately £2.5m lower than it would have been at the end of a normal 52-week period and so the true underlying increase in cash from operations was more like 19%.
After making payments of £3.7m (2010 – £3.7m) of corporation tax, there was £18.4m (2010 – £12.5m) available for investment or financing.
During the year the cash outflow on property, plant & equipment was £22.3m (2010 – £19.6m), which covered capital expenditure for the fit out of new restaurants, as well as refurbishment and rebranding projects for the existing estate, together with the purchase of seven (2010 – five) freehold properties at a cost of £6.4m (2010 – £8.2m). In addition, there was a cash outflow of £1.7m (2010 – £3.2m) on acquisitions and a cash inflow of £488,000 (2010 – £745,000) from the sale of property, plant and equipment.
It has been a deliberate policy over the last few years to divert surplus cash funds into buying selective freehold properties which we believe will deliver a much improved return than we can achieve by holding cash and as a result, at 1 January 2012, we had net cash balances of £39,000 (2010 – £5.3m).
This movement to a more cash neutral balance sheet notwithstanding, we are comfortable that our continued strong cash generation, together with a £5m short-term borrowing facility currently in place, will provide us with sufficient flexibility and resources to comfortably fund our anticipated expansion plans for the foreseeable future.
Dividend
The Board recommends that the final dividend payment for the year is increased to 0.250p (2010 – 0.225p) per 5p ordinary share. This will be paid on 6 July 2012 to shareholders on the register on 15 June 2012.
Staff
As ever, in the task of developing a successful restaurant business, the importance of the efforts and dedication of all our staff cannot be underestimated. On behalf of the Board, I would like to take the opportunity to thank the entire team for their hard work in 2011.
Outlook
The outlook for the UK economy remains uncertain. After a sustained period of strong trading in the fourth quarter of 2011, it should perhaps not be too surprising that there has been some evidence that the UK consumer has been more cautious in the early months of 2012.
Despite this, the business continues to grow steadily and to further strengthen the presence of its brands in the UK marketplace. Like any other year, I am certain that 2012 will present us with attractive opportunities and as a Board we are confident of delivering solid growth in the year ahead.