Prezzo : Preliminary Results



Prezzo Plc

Preliminary results for the 52 weeks ended 29 December 2013

Highlights

·      Revenue up 15% to £166.5 million

(2012 - £144.5 million)

·      Adjusted* EBITDA up 13% to £28.9 million

(2012 - £25.5 million)

·      Adjusted* pre-tax profit up 11% to £20.4 million

(2012 - £18.3 million)

·      Statutory pre-tax profit of £18.4 million

(2012 - £17.3 million)

·      Adjusted* diluted EPS up 16% to 6.85 pence

(2012 - 5.90 pence)

·      Diluted EPS is 6.15 pence

(2012 - 5.58 pence)

·      Proposed final dividend raised 13% to 0.310 pence per share

(2012 - 0.275 pence per share)

·      28 restaurants (2012 - 31) launched during the period

·      Currently 238 restaurants trading

* excluding the impact of a £1.9 million (2012 - £0.9 million) charge for non-trading items (see note 7)

9 April 2014
Enquiries
Prezzo plc	Tel: [phone]
Jonathan Kaye, Chief Executive
Alan Millar, Finance Director
Cenkos Securities	Tel: [phone]
Bobbie Hilliam

Prezzo Plc ("The Company ")

Chairman's statement

I am delighted to report another set of strong results for the 52 weeks ending 29 December 2013. Steady progress over the second half of the year, together with a number of successful new openings has enabled us to extend our record of double-digit growth with adjusted* pre-tax profits up 11% to £20.4m (2012 - £18.3m).

Results

For the 52 weeks ended 29 December 2013, revenues increased 15% to £166.5m (2012 - £144.5m) and gross or restaurant profit increased 11% to £23.2m (2012 - £20.9m).

Adjusted* EBITDA increased 13% from £25.5m to £28.9m and adjusted* operating profit excluding non-trading items increased by 11% from £18.3m to £20.4m.

Adjusted* pre-tax profit increased by 11% to £20.4m (2012 - £18.3m) and after a £1.9m (2012 - £0.9m) charge for non-trading items (see details in note 5) stated pre-tax profit was £18.4m (2012 - £17.3m).

The effective tax rate for the period has been calculated at 22% (2012 - 25%). Adjusted* diluted earnings per share were up 16% to 6.85p (2012 - 5.90p) and diluted earnings per share were 6.15p (2012 - 5.58p).

Estate development

We opened 28 new restaurants in 2013 (2012 - 31) and closed one unit (2012 - two) and therefore there were 237 (2012 - 210) restaurants at the end of the period. This included 194 trading as Prezzo, 37 Chimichanga restaurants and four units trading as Cleaver, a new concept which we launched in summer 2013.

These openings provided us with our first representation in major population centres such as Belfast and Leeds, together with additional sites in Bath, Oxford and Glasgow. We also continue to open in successful leisure and retail developments such as the Whiteley Shopping Centre in Hampshire, Gloucester Quays and Bicester and in small provincial towns such as Rayleigh, Felixstowe and Kettering. This wide range of locations into which our brands can be introduced is one of the key strengths of our business.

Summer 2013 saw us launch a new concept in Cleaver which offers high quality, home-reared chicken, ribs and burgers from our open grill kitchen. Our first opening was in Cobham, in Surrey and this has been followed by three more units in Leatherhead, Wokingham and Oxford which together provide us with a test-bed for further development and refinement of the brand. Early signs and initial sales have however been encouraging.

So far this year, we have opened one additional new restaurant in Ripon and we are also on site in a further six locations. Our property pipeline for 2014 is well-advanced and plans for 2015 and beyond are also taking shape. Once again, we would anticipate opening 25-30 new restaurants by the end of the year.

Cash flows and financing

Cashflow from operations was broadly in line at £30.8m (2012 - £31.3m) and after making corporation tax payments of £3.9m (2012 - £4.2m), there was £26.9m (2012 - £27.2m) available for investment or financing.

During the year the cash outflow on property, plant and equipment was £26.1m (2012 - £24.1m), which covered capital expenditure for the fit out of new restaurants, as well as refurbishment and rebranding projects for the existing estate. This also included the purchase of one freehold property at a cost of £1.2m and we sold one leasehold site for cash proceeds of £0.1m (2012 - sold one freehold and three leaseholds for £1.4m).

Overall there was a net cash inflow of £1.5m (2012 - £4.3m) and at 29 December net cash on the balance sheet had risen to £5.8m (2012 - £4.4m).

Once again, our continued strong cash generation, together with a modest short-term borrowing facility and a portfolio of readily saleable freehold properties will provide us with sufficient flexibility and funds 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 by 13% to 0.310p (2012 - 0.275p) per 5p ordinary share. This will be paid on 4 July 2014 to shareholders on the register on 13 June 2013.

Staff

The warm welcome extended to our guests by the Prezzo team is absolutely paramount and we continue to place great emphasis on training and development for all levels of staff at our Training Academy. Once again, I would like to take the opportunity to thank all our staff for the extraordinary levels of enthusiasm and commitment they have demonstrated in 2013.

Outlook

Finally, there are indications that the vital signs of the UK economy are improving, and therefore having delivered a continuous record of growth throughout its recent period of difficulties, there is every reason to be positive about our future performance. We have enjoyed an encouraging start to the year and with a strong site pipeline in place, the Board is confident of further success in 2014.

Michael Carlton

Chairman

9 April 2014

* excluding the impact of a £1.9 million (2012 - £0.9 million) charge for non-trading items (see note 7)

Prezzo Plc

Statement of comprehensive income for the 52 weeks ended 29 December 2013

	Note		2013		2012
			£'000		£'000
Revenue			166,541		144,524
Cost of Sales	3		(143,380)		(123,614)
Gross profit			23,161		20,910
Administration costs			(4,708)		(3,582)
Operating profit excluding non-trading items			20,373		18,255
Non-trading items	5		(1,920)		(927)
Operating profit	4		18,453		17,328
Finance income			11		9
Finance expense			(15)		(13)
Profit before tax			18,449		17,324
Income tax expense	6		(4,029)		(4,380)
Profit and total comprehensive income for the financial period attributable to Equity Shareholders			14,420		12,944
Earnings per share -	7
Basic			6.23p		5.66p
Diluted			6.15p		5.58p

Statement of changes in equity for the 52 weeks ended 29 December 2013

	Share	Share	Capital	Share	Retained	Total
	Capital	Premium	Redemption	Option	Earnings	Equity
		Account	Reserve	Reserve
	£'000	£'000	£'000	£'000	£'000	£'000
Balance at 1 January 2012	11,385	21,331	168	1,751	44,172	78,807
Total comprehensive income for the  period	-	-	-	-	12,944	12,944
Dividend Paid	-	-	-	-	(572)	(572)
Share-based payments - credit to equity for the period	-	-	-	67	-	67
Tax on share-based payments taken directly to equity	-	-	-	36	-	36
Transfer in respect of options exercised	-	-	-	(152)	152	-
Issue of new ordinary shares	73	348	-	-	-	421
Balance at 30 December 2012	11,458	21,679	168	1,702	56,696	91,703
Total comprehensive income for the period	-	-	-	-	14,420	14,420
Dividend paid	-	-	-	-	(639)	(639)
Share-based payments - credit to equity for the period	-	-	-	95	-	95
Tax on share-based payments taken directly to equity	-	-	-	131	275	406
Transfer in respect of options exercised	-	-	-	(432)	432	-
Issue of new ordinary shares	195	1,041	-	-	-	1,236
Balance at 29 December 2013	11,653	22,720	168	1,496	71,184	107,221

Balance sheet at 29 December 2013

Company number - 3919682

		29 December 2013		30 December 2012
		£'000		£'000
Non-current assets
Intangible assets		1,419		1,508
Property, plant and equipment		129,882		112,957
Pre-paid operating leases		4,277		4,257
Deferred tax asset		779		547
		136,357		119,269
Current assets
Inventories		5,272		4,559
Prepaid operating lease		3,933		3,426
Trade and other receivables		6,567		5,975
Cash and cash equivalents		5,843		4,367
		21,615		18,327
Total Assets		157,972		137,596
Current liabilities
Trade and other payables		(35,738)		(32,499)
Current tax liabilities		(4,127)		(3,888)
		(39,865)		(36,387)
Non-current liabilities
Accruals		(5,542)		(3,892)
Deferred tax liabilities		(5,344)		(5,614)
		(10,886)		(9,506)
Total liabilities		(50,751)		(45,893)
Net assets		107,221		91,703
Equity
Called-up share capital		11,653		11,458
Share premium account		22,720		21,679
Capital redemption reserve		168		168
Share option reserve		1,496		1,702
Retained earnings		71,184		56,696
Total equity attributable to equity shareholders		107,221		91,703

Cash flow statement for the 52 weeks ended 29 December 2013

		2013		2012
		£'000		£'000
Cash flows from operating activities
Net cash inflow from operating activities	9	30,814		31,398
Corporation tax paid		(3,886)		(4,204)
Net cash inflow from operating activities		26,928		27,194
Cash flows from investing activities
Finance income		11		9
Payments to acquire property, plant and equipment		(26,137)		(24,098)
Proceeds from sale of property, plant and equipment		92		1,387
Net cash outflow from investing activities		(26,034)		(22,702)
Cash flows from financing activities
Finance expense		(15)		(13)
Issue of new ordinary shares		1,236		421
Equity dividend paid		(639)		(572)
Net cash inflow/(outflow) from financing activities		582		(164)
Net increase in cash and cash equivalents		1,476		4,328
Cash and cash equivalents as at 30 December 2012		4,367		39
Cash and cash equivalents as at 29 December 2013		5,843		4,367

Notes

1    General Information

Prezzo plc ("Prezzo") is a public limited company ("the Company") incorporated in the United Kingdom under the Companies Act 2006 (registration number 3919682). The Company is domiciled in the United Kingdom and its registered address is Johnston House, 8, Johnston Road, Woodford Green, IG8 0XA. The Company's ordinary shares are traded on the Alternative Investment Market ("AIM"). Copies of the Annual Report will be sent out to shareholders. Further copies of the Interim Report to 30 June 2013 or the Annual Report and Financial Statements may be obtained from the above address or on the Corporate section of the Company's website atwww.prezzorestaurants.co.uk.

2    Basis of preparation

The financial information in these preliminary results has been prepared using the recognition and measurement principles of International Accounting Standards, International Financial Reporting Standards and Interpretations adopted for use in the European Union (collectively Adopted IFRSs). They are presented in pounds sterling, rounded to the nearest thousand. The same accounting policies, presentation and methods of computation have been followed in the preparation of these results as were applied in the Company's 2012 Report and Accounts.

The financial information set out in this announcement does not constitute the Company's statutory accounts for the 52 weeks ended 29 December 2013 or the 52 weeks ended 30 December 2012. Statutory accounts for the 52 weeks ended 29 December 2013 and the 52 weeks ended 30 December 2012 have been reported on by the Independent Auditors. The Independent Auditors' Report on the Annual Report and Financial Statements for both periods was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006. The Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The statutory accounts for the 52 weeks ended 29 December 2013 will be delivered to the registrar in due course.

3    Cost of sales

	2013		2012
Cost of sales can be further analysed as follows -	£'000		£'000
Excluding pre-opening costs	142,395		122,462
Pre-opening costs	985		1,152
	143,380		123,614

4    Operating profit

	2013		2012
This has been arrived at after charging -	£'000		£'000
Staff costs	53,297		46,159
Depreciation	8,556		7,249
Loss on disposal of property, plant and equipment and inventory	1,380		826
Impairment of property, plant and equipment	1,221		245
Impairment of intangibles	89		49
Auditors' remuneration  - audit services	85		82
- tax compliance	30		30
Operating lease rentals	15,464		13,503

Of the total of £1,380,000 (2012 - £826,000) loss on disposal of property, plant and equipment and inventory, a £839,000 loss (2012 - £815,000) is included within cost of sales and a loss on disposal of £541,000 (2012 - £11,000) is included within non-trading items (see note 5).

5    Non-trading items - charged to administrative expenses

	2013		2012
	£'000		£'000
Loss on sale of property, plant and equipment and inventory	541		11
Write-off of rent premium	145		-
Payments made in respect of termination of lease	-		(28)
(Release)/provision for onerous lease	(97)		628
Provision for impairment of fixed assets	1,221		245
Provision for impairment of intangibles	89		49
Site abort costs	21		22
	1,920		927

During the period, the net sales proceeds arising from the sale of interests in freehold and leasehold properties was £92,000 (2012 - £1,387,000) and resulting in a loss of £44,000 (2012 - £169,000 profit). Then taken together with the write-off of £446,000 (2012 - £108,000) rebranding costs and the write-off of £51,000 (2012 - £72,000) crockery stocks, the overall loss on disposal from these transactions was £541,000 (2012 - £11,000).

A £97,000 overprovision in respect of onerous leases has been released following the disposal of the related properties (2012 - £628,000 provison was made in respect of two leasehold properties).

In accordance with IAS36 Impairment of Assets, the Company has carried out a review of the carrying values of plant, property and equipment, taking into account the current trading performance and anticipated future cashflows discounted at a pre-tax rate of 10% in order to assess whether there is any indication of impairment. Assets are carried at their recoverable amount which is the higher of fair value less costs to sell or their economic use in the business. When a trading unit where recent performance and anticipated cashflows would suggest that it may have no economic value in use to the business has been identified, it has been valued at net realisable value based on the Directors' experience of the commercial property market and their view of its likely value on disposal.

As a result of the above process, a provision for impairment of £1,921,000 (2012 - £2,095,000) has been made against the book value of five (2012 - seven) properties. However, the Board has also identified two other properties (2012 - six) which had previously been impaired and where performance has improved to such a degree that it is now appropriate to reverse £700,000 (2012 - £1,850,000) of this historic impairment. As a result, there was a net impairment charge of £1,221,000 (2012 - £245,000).

In addition, £89,000 (2012- £5,000) of purchased goodwill in respect of one leasehold site has been written-off. In 2012 there was also a £44,000 write-down on trademarks, taking the total provision for impairment of intangibles to £49,000.

6    Income tax expense

	2013		2012
UK Corporation tax	£'000		£'000
Current tax on profit for the period	4,400		4,250
Total current tax	4,400		4,250
Deferred tax
Credit in respect of change in future rate of taxation	(724)		(450)
Origination and reversal of temporary differences	425		631
Temporary differences on rolled over gains on property disposals	29		19
Share-based payment temporary difference	(101)		(70)
Total Deferred tax	(371)		130
Total expense in the statement of comprehensive income	4,029		4,380

The tax assessed for the period is higher than the standard rate of corporation tax in the UK.  The differences are explained below -

	2013		2012
	£'000		£'000
Profit before tax	18,449		17,324
Tax on profit at the average rate of corporation tax in the UK of 23.25% (2012 - 24.5%)	4,289		4,244
Effects of
Credit in respect of change in future rate of taxation	(724)		(450)
Depreciation on ineligible fixed assets	639		598
Non-qualifying impairment charges	135		21
(Profit)/Loss on sale of non-qualifying assets	(18)		(77)
Release of onerous lease provision	(11)		-
Adjustment in respect of share options	(337)		(191)
Other	56		235
Tax expense for the period as shown above	4,029		4,380

The taxation charge in future periods will be influenced by any changes in the rate of taxation, the occurrence, if any, and quantum of future non-trading items, any gains arising on any disposal of freehold properties and the influence of the future share price on the deferred tax asset in respect of share options.

7    Earnings per share

	2013		2012
	pence		pence
Basic earnings per share	6.23		5.66
Diluted earnings per share	6.15		5.58
Adjusted basic earnings per share	6.93		6.00
Adjusted diluted earnings per share	6.85		5.90
Earnings per share has been calculated using the numbers shown below -
	2013		2012
	£'000		£'000
Profit for the financial period	14,420		12,944
Non trading items (see note 5)	1,920		927
Estimated taxation effect of non trading items	(290)		(170)
Adjusted profit for the financial period	16,050		13,701

An adjusted earnings per share figure has been provided to show the level of earnings per share before the impact of non-trading items as set out in note 5.

	2013		2012
	Number		Number
Weighted average number of ordinary shares in issue	231,628,185		228,540,264
Impact of dilutive share options	2,689,565		3,499,443
Diluted weighted average number of ordinary shares	234,317,750		232,039,707

The weighted average number of ordinary shares is adjusted to take into account the dilutive impact of share options granted to employees. 2,264,500 options (2012 - 1,217,000) were excluded from this calculation due to the fact that they were non-dilutive on the basis of the average share price during the period.

Adjusted profit before tax for headline reporting purposes was calculated as follows -

	2013		2012
	£'000		£'000
Profit before taxation	18,449		17,324
Non-trading items (see note 5)	1,920		927
Adjusted profit before taxation	20,369		18,251
Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was £28,929,000 (2012 - £25,507,000).

8    Dividend

	2013			2012
	£'000			£'000
Amounts recognised as distributions to equity shareholders in the period		639		572

The dividend payment recognised during 2013 was the final dividend declared in respect of the 52 weeks ended 30 December 2012 of 0.275p (2011 - 0.250p)

	2013		2012
	£'000		£'000
Proposed final dividends	720		630

Proposed final dividend for the period ended 29 December 2013 of 0.310p (2012 - 0.275p) per share.

The proposed final dividend for the period ended 29 December 2013 is subject to approval by shareholders at the AGM to be held on 6 June 2014 and is not recognised as a liability in these financial statements.

9    Reconciliation of profit before tax to net cash inflow from operating activities

	2013		2012
	£'000		£'000
Profit before taxation	18,449		17,324
Finance income	(11)		(9)
Finance expense	15		13
Depreciation and amortisation	8,556		7,252
Share-based payment charge	95		67
Loss on disposal of property, plant and equipment and inventory	1,380		826
Release of provision for onerous lease	(97)		-
Write-off of rent premium	145		-
Impairment of property, plant and equipment	1,221		245
Impairment of intangibles	89		49
Increase in inventories	(764)		(793)
Increase in receivables	(1,265)		(2,294)
Decrease in payables	3,001		8,718
Net cash inflow from operating activities	30,814		31,398

This information is provided by RNS

The company news service from the London Stock Exchange

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