prezzo plc

('Prezzo' or 'the Company')

Interim results (unaudited) for the 26 weeks ended 28 June 2009 

highlights

•

Revenue up 5.5% to £43.7 million (2008 - £41.4 million)

•

Adjusted* EBITDA was in line at £7.1 million (2008 - £7.1 million)

•

Adjusted* pre-tax profit 1.4% lower at £5.1 million (2008 - £5.2 million)

•

Statutory pre-tax profit of £5.1 million (2008 - £2.9 million)

•

Adjusted* diluted EPS of 1.54 pence (2008 - 1.55 pence)

•

Diluted EPS were 1.54 pence (2008 - 0.69 pence)

•

Currently 137 restaurants trading

•

Current trading is in line with expectations

* before impact of non-trading items (see note 6)

Enquiries

Prezzo Plc

Jonathan Kaye, Chief Executive

020 8505 4782

Alan Millar, Finance Director

Evolution Securities

Bobbie Hilliam

020 7071 4300

prezzo plc

chairman's statement

In what has been a particularly challenging climate, the Company has delivered a robust performance with revenues up 5.5% to £43.7m (2008 - £41.4m) and only a modest 1.4% decline in adjusted* pre-tax profit to £5.1m (2008 - £5.2m).

Results

Revenue for the 26 weeks ended 28 June 2009 rose 5.5% from £41.4m to £43.7m, with gross or restaurant profit in line with last year at £5.9m (2008 - £5.9m). The overall branch profit margin was 13.5% compared with 14.3% for 2008. We consider this to be a strong result as, in line with our competitors, we have implemented an element of promotional activity to drive our top line sales to suit the demands of the wider economic climate.

Operating profit excluding non-trading items mirrored last year at £5.1m (2008 - £5.1m), and after a lower contribution from finance income at £38,000 (2008 - £93,000), due to the sharply reduced yield on cash assets during the period, adjusted* pre-tax profit was 1.4% lower at £5.1m (2008 - £5.2m). Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was £7.1m (2008 - £7.1m).

There were no non-trading items in the period (2008 - £2.3m) and, as a result, stated pre-tax profit was also £5.1m (2008 - £2.9m).

The effective tax rate for the period has been calculated at 31% (2008 - 44%). Adjusted* diluted earnings per share were 1.54p (2008 - 1.55p) and in the absence of any non-trading items, diluted earnings per share were 1.54p (2008 - 0.69p).

Estate development

As indicated in our 2008 annual report, we anticipated a reduced schedule of new restaurants in 2009 and in fact we opened no restaurants during the first six months of the year. However, I am pleased to report that more recently we have completed on our first opening of the year and I can also confirm that there are several more in the pipeline.

Since the end of the period we have closed three branches, all of which were subject to a full impairment charge in 2008. In addition, two branches in Lincoln have been combined as one and reopened as a larger Prezzo restaurant. As a result, we are currently trading from 137 restaurants.

* before impact of non-trading items (see note 6)

Cash flows and financing

Net cash generated from operations was 25% lower at £7.1m (2008 - £9.5m), but this was due to a one-off cash outflow of £0.5m together with the timing of certain other working capital movements and does not represent any deterioration in our working capital management.

During the period, there was a cash outflow of £1.3m (2008 - £11.0m) on payments to acquire property, plant & equipment, with c. £1.0m of this related to the fit-out of new branches that were opened before the end of 2008.

Overall, there was a net cash inflow of £4.8m (2008 - £1.8m outflow) in the period and as at 28 June 2009, net cash balances had risen to £13.9m (2008 - £5.0m). As in previous years, no interim dividend will be paid.

Outlook

Although trading in the early months of 2009 was perhaps better than we had feared, it is fair to say that the UK consumer remains subdued and we believe that there are as yet few signs of any sustained recovery in confidence.

Nevertheless, we remain confident both in the value and quality of our offer as well as our ability to respond to new challenges that this volatile period may present. In light of which, providing trading continues at broadly comparable levels, the Board expects to deliver a satisfactory outcome for the current year.

Michael Carlton

9 September 2009

*before impact of non-trading items (see note 6)

prezzo plc

condensed statement of comprehensive income

unaudited 

unaudited 

audited 

26 weeks to 

26 weeks to 

52 weeks to 

28 June 

29 June 

28 December 

2009

2008

2008

£'000 

£'000 

£'000 

Revenue

3

43,656 

41,376 

85,871 

Cost of sales

(37,779)

(35,474)

(73,025)

Gross profit

5,877 

5,902 

12,846 

Administration expenses

(805)

(3,139)

(9,155)

Operating profit excluding non-trading items

5,072 

5,092 

11,284 

Non-trading items

4

 - 

(2,329)

(7,593)

Operating profit

5,072 

2,763 

3,691 

Finance income

38 

93 

190 

Profit on ordinary activities before taxation

5,110 

2,856 

3,881 

Income tax expense

5

(1,565)

(1,252)

(2,814)

Profit on ordinary activities after taxation attributable to equity shareholders

3,545 

1,604 

1,067 

Earnings per share - basic

6

1.55p

0.70p

0.47p

Earnings per share- diluted

6

1.54p

0.69p

0.46p

prezzo plc

condensed statement of changes in equity

Share

Share

Share

Retained

Total

Capital

Premium

Option

Earnings

Equity

Reserve

Reserve

£'000

£'000

£'000

£'000

£'000

Balance at 28 December 2008

11,466

20,999

1,139

18,079

51,683

Profit for the period

-

-

-

3,545

3,545

Total comprehensive income for the period

-

-

-

3,545

3,545

Share-based payments - credit to equity for the period

-

-

81

-

81

Tax on share-based payments taken directly to equity

-

-

23

-

23

Balance at 28 June 2009 (unaudited)

11,466

20,999

1,243

21,624

55,332

Balance at 30 December 2007

  11,466 

  20,999 

  1,181 

  17,471 

  51,117 

Profit for the period

  - 

  - 

  - 

  1,604 

  1,604 

Total comprehensive income for the period

  - 

  - 

  - 

  1,604 

  1,604 

Share-based payments - credit to equity for the period

  - 

  - 

99

  - 

  99 

Tax on share-based payments taken directly to equity

  - 

  - 

(144)

  - 

(144)

Balance at 29 June 2008 (unaudited)

  11,466 

  20,999 

  1,136 

  19,075 

  52,676 

Balance at 30 December 2007

  11,466 

  20,999 

  1,181 

  17,471 

  51,117 

Profit for the period

 - 

 - 

  - 

  1,067 

  1,067 

Total comprehensive income for the period

  - 

  - 

  - 

  1,067 

  1,067 

Dividend paid

(459)

(459)

Share-based payments - credit to equity for the period

  - 

  - 

208

  - 

  208 

Tax on share-based payments taken directly to equity

  - 

  - 

(250)

  - 

(250)

Balance at 28 December 2008

  11,466 

  20,999 

  1,139 

  18,079 

     51,683 

prezzo plc

condensed balance sheet

unaudited 

unaudited 

audited 

As at 28 June 

As at 29 June 

As at 28 December 

2009 

2008 

2008 

£'000 

£'000 

£'000 

Non-current assets

Property, plant and equipment

59,163 

63,526 

60,920 

Prepaid operating lease charges

3,101 

3,774 

3,164 

Deferred tax asset

89 

189 

64 

62,353 

67,489 

64,148 

Current assets

Inventories

2,446 

2,302 

2,592 

Prepaid operating lease charges

2,132 

2,230 

2,194 

Trade and other receivables

993 

1,349 

2,312 

Cash and cash equivalents

13,918 

5,030 

9,150 

19,489 

10,911 

16,248 

Total assets

81,842 

78,400 

80,396 

Current liabilities

Trade and other payables

(16,875)

(16,902)

(19,582)

Current tax liabilities

(3,058)

(2,525)

(2,838)

(19,933)

(19,427)

(22,420)

Non-current liabilities

Accruals and deferred income

(2,256)

(2,062)

(2,164)

Deferred tax liabilities

(4,321)

(4,235)

(4,129)

(6,577)

(6,297)

(6,293)

Total liabilities

(26,510)

(25,724)

(28,713)

Net assets

55,332 

52,676 

51,683 

Capital and reserves attributable to equity shareholders

Share capital 

11,466 

11,466 

11,466 

Share premium

20,999 

20,999 

20,999 

Share option reserve

1,243 

1,136 

1,139 

Retained earnings

21,624 

19,075 

18,079 

Capital and reserves

55,332 

52,676 

51,683 

prezzo plc

condensed cash flow statement

unaudited 

unaudited 

audited 

26 weeks to 

26 weeks to 

52 weeks to 

28 June 

29 June 

28 December 

2009 

2008 

2008 

£'000 

£'000 

£'000 

Cash inflow from operating activities

Cash inflow from operating activities

9

7,151 

9,543 

20,531 

Income tax paid

(1,155)

(532)

(1,867)

Net cash inflow from operating activities

5,996 

9,011 

18,664 

Cash outflow from investing activities

Finance income

38 

  96 

  193 

Payments to acquire property, plant and equipment

(1,266)

(10,986)

(16,158)

Proceeds from sale of property, plant and equipment

  - 

  38 

39 

Net cash outflow from investing activities

(1,228)

(10,852)

(15,926)

Net cash outflow from financing

Equity dividend paid

  - 

  - 

(459)

Net cash outflow from financing

  - 

  - 

(459)

Net increase/(decrease) in cash and cash equivalents

4,768 

(1,841)

2,279 

Cash and cash equivalents as at 28 December 2008

9,150 

6,871 

6,871 

Cash and cash equivalents as at 28 June 2009

13,918 

5,030 

9,150 

notes to the condensed financial statements

1

General information

Prezzo plc ('Prezzo') is a public limited company ('the Company') incorporated in the United Kingdom under the Companies Act 1985 (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 this Interim Report will be sent out to shareholders. Further copies of the Interim Report or the Annual Report and Accounts may be obtained from the above address or on the Investor Relations section of the Company's website at www.prezzoplc.co.uk.

2

Basis of preparation

The condensed financial statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as endorsed for use by Companies listed on an EU regulated market and in accordance with IAS34 - 'Interim Financial Reporting' . 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 latest annual audited financial statements. It is not expected that there will be any changes or additions to these in the 2009 annual financial statements.

During the period the Group has adopted IAS1 (amended) 'Presentation of Financial Statements'. The effect of adopting this standard is presentational and has no impact on the reported profit or net assets of any period. The adoption of IAS1 has meant that the income statement has been renamed the statement of comprehensive income.

This statement does not comprise statutory accounts as defined in Section 240 of the Companies Act 1985 and the results for the 26 weeks to 28 June 2009 and for the 26 weeks to 29 June 2008 are unaudited.

The financial information for the 52 weeks to 28 December 2008 is an extract from the latest company accounts. Statutory financial statements for the year ended 28 December 2008, prepared in accordance with IFRS, on which the auditors gave an unqualified opinion, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their reports and did not include a statement under section 237(2) or (3) of the Companies Act 1985, have been filed with the Registrar of Companies and are available on the Company's website.  

The condensed financial statements are presented in sterling and all values are rounded to the nearest thousand pounds (£'000) except when otherwise indicated.

3

Revenue

Revenue is wholly attributable to the principal activity of the Company and arises solely within the UK.

4

Non-trading items

unaudited 

unaudited 

audited 

26 weeks to

26 weeks to 

52 weeks to 

28 June 

29 June 

28 December 

2009 

2008 

2008 

£'000 

£'000 

£'000 

(Loss)/profit on sale of property, plant and equipment

  - 

97

  225 

Termination of lease

  - 

304

  874 

Costs in connection with aborted site developments

  - 

129

  - 

Rent premiums written-off

  - 

  - 

  451 

Provision for impairment of property, plant and equipment

  - 

1,799

  6,043 

  - 

2,329

7,593

During the period, the company disposed of its interest in one leasehold property but no sales proceeds (2008 H1 - £38,000) were received and as the assets concerned had previously been impaired, there was no profit or loss arising from this transaction (2008 H1 - £97,000).

In accordance with the requirements of IAS 36, the Company has updated its review of the carrying values of plant, property and equipment to see whether there is any indication of impairment. An assessment has been made taking into account the current trading performance and where available, historic trading performance together with the anticipated future cash flows from individual cash generating units in accordance with IAS 36 Impairment of Assets. 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. In the view of the Directors there were no units which should be subjected to an impairment charge in the period (2008 H1 - £1,799,000).

5

Income tax expense

The income tax charge for the 26 weeks to 28 June 2009 has been calculated by applying the estimated effective corporation tax and deferred tax rates for the 52 weeks to 27 December 2009 to the profit before tax for the 26 weeks ending 28 June 2009. The full-year effective tax rate on profit before tax is estimated to be 31% (2008 H1: 44%).

6

Earnings per share

unaudited 

unaudited 

audited 

26 weeks to 

26 weeks to 

28 December 

28 June 

29 June 

2008

2009 

2008 

2008 

Pence

Pence

Pence

Basic earnings per share

1.55

0.70

0.47

Diluted earnings per share

1.54

0.69

0.46

Adjusted earnings per share

1.55

1.56

3.35

Adjusted diluted earnings per share

1.54

1.55

3.32

Earnings per share has been calculated using the numbers shown below -

unaudited 

unaudited 

audited 

26 weeks to 

26 weeks to 

52 weeks to 

28 June 

29 June 

28 December 

2008 

2008 

2008 

£'000 

£'000 

£'000 

Profit for the financial period

  3,545 

1,604 

1,067 

Non-trading items (see note 4)

  - 

2,329 

7,593 

Estimated taxation effect of non-trading items

  - 

(346)

(969)

Adjusted profit for the period

  3,545 

3,587 

7,691 

Number

Number

Number

Weighted average number of ordinary shares in issue

229,313,815

229,313,815

229,313,815

Impact of dilutive share options

1,374,029

2,602,811

2,334,121

Diluted number of ordinary shares in issue

230,687,844

231,916,626

231,647,936

The weighted average number of ordinary shares is adjusted to take into account the dilutive impact of share options granted to employees. There were 6,235,000 options in issue that were non-dilutive (2008 H1 - 5,595,000) on the basis of the average share price during the period.

An adjusted earnings per share figure has been provided, principally to show the level of earnings per share before the impact of non-trading items as set out in note 4.

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

unaudited 

unaudited 

audited 

(restated)

(restated)

26 weeks to 

26 weeks to 

52 weeks to 

28 June 

29 June 

28 December 

2009 

2008 

2008 

£'000 

£'000 

£'000 

Profit on ordinary activities before taxation

  5,110 

2,856 

3,881 

Non-trading items (see note 4)

  - 

2,329 

7,593 

Adjusted profit before taxation

  5,110 

5,185 

11,474 

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) was £7,089,000 (2008 H1 - £7,069,000).

7

Purchase of property, plant & equipment

During the period the company spent £260,000 (2008 H1 - £8,329,000) on additions to property, plant and equipment and disposed of items of property, plant and equipment with a net book value of Nil (2008 H1 - £105,000).

8

Capital commitments

unaudited 

unaudited 

audited 

As at 

As at 

As at 

28 June 

29 June 

28 December 

2009 

2008 

2008 

£'000 

£'000 

£'000 

Authorised and contracted

 385 

2,014 

  - 

9

Reconciliation of profit before tax to cash inflow from operating activities

unaudited 

unaudited 

audited 

26 weeks to 

26 weeks to 

52 weeks to 

28 June 

29 June 

28 December 

2009 

2008 

2008 

£'000 

£'000 

£'000 

Profit before taxation

  5,110 

2,856 

3,881 

Finance income

(38)

(93)

(190)

Depreciation and amortisation

  2,017 

1,977 

4,119 

Share based payment charge

  81 

99 

208 

Loss/(profit) on disposal of property, plant and equipment

  - 

88 

225 

Impairment of property, plant and equipment

  - 

  1,799 

6,043 

Write-off of rent premiums

  - 

  - 

451 

Decrease/(Increase) in inventories

146 

(124)

(450)

Decrease in receivables

  1,444 

1,060 

292 

(Decrease)/increase in payables

(1,609)

1,881 

5,952 

Cash inflow from operating activities

7,151

9,543

20,531

10

Risks and uncertainties

The principal risks and uncertainties faced by the Company are set out in note 26 in the 2008 annual report and they will continue to represent risk during the remaining six months of the financial year.

There are a number of potential risks and uncertainties which could have a material impact on the Company's performance over the remaining six months of the financial year and could cause actual results to differ materially from expected and historical results. The key risks include a more challenging economic climate with weaker consumer spending which could impact revenues, together with increased raw material and other operating costs which could increase pressure on margins.

11

Related party transactions

During the period the Company did not enter into any new contracts with related parties (2008 H1 one new lease with an annual rent of £52,000). Other than annual commitments under ongoing lease arrangements which were disclosed on page 27 of the 2008 annual report and accounts, there were no other related party transactions in the period. 

The aggregate amount of remuneration paid to key management personnel during the period was £180,000 (2008 - £175,000).