Interim Results
February 11 2003 - 2:01AM
UK Regulatory
PizzaExpress PLC
Interim Report for the six months ended 31 December 2002
Key Points
Group turnover up 8% to �112.0m
Profit before tax excluding exceptional costs down 18% to �17.8m
Basic earnings per share 16.6p
Dividend increased by 20% to 3.0p per share
UK & Ireland pizza restaurant like for like sales -4.8% (2001: 3.0%)
Larger pizze introduced with increased menu choice in December
Management changes leading to increasing focus on quality and service
Refurbishment programme underway
11 February 2003
An analyst presentation will be held today at 9.30am at Citigate Dewe Rogerson, 26 Finsbury Square, London EC2. A copy
of this presentation will be available today on the Company's website www.pizzaexpress.com.
Enquiries: Nigel Colne, Chairman
David Page, Chief Executive
Paul Campbell, Group Finance Director
Tel: 01895 618618
Sue Pemberton, Citigate Dewe Rogerson
Tel: 020 7638 9571
Registered Office:
1 Union Business Park
Florence Way
Uxbridge
UB8 2LS
INTERIM STATEMENT
For the six months ended 31st December 2002
Results
The six months to 31st December 2002 saw continued disappointing trading in our core PizzaExpress restaurants
especially in central London and within the M25, and this is reflected in these results. Group turnover rose 7.9% to
�112.0m (2001: �103.8m). Group operating margin fell to 15.6% (2001:20.8%), mainly due to like-for-like sales declines
in our core UK and Ireland pizza restaurants. Profit before taxation excluding exceptional items fell 18.3% to �17.8m
(2001: �21.8m).
Basic earnings per share decreased by 19.4% to 16.6p (2001: 20.6p). Our interim dividend is increased by 20% to 3p per
share (2001: 2.5p).
UK and Ireland Pizza restaurants
Trading conditions remained difficult during the period and competition remains fierce, particularly from the pub
sector. Total sales were up 4% at �100.2m, with an average spend per head of �12.30. PizzaExpress restaurants
like-for-like sales declined from -4.4% in the first quarter to -5.1% in the second quarter, making a cumulative half
year total of -4.8%. Within the M25 like-for-like sales fell by 10%, whilst outside the region sales were flat. As a
consequence, operating profits fell to �17.1m (2001:�21.5m).
As at 31st December there were 311 PizzaExpress restaurants operating in the UK and Ireland. We opened 11 new
restaurants during the period, the majority being outside the M25. As trading conditions continue to be tough, our
site selection criteria remain stringent. The projected new opening number for the full year is 19 restaurants.
After 37 years, in December 2002, we took the historic step of increasing our pizza size. This was in response to
extensive customer research and trialling in both the UK and Eire. A new menu was also launched in December. Initial
reaction to these moves has been encouraging, and further development of our menu will follow in the spring.
The refurbishment programme announced at the end of last year has now commenced. 13 restaurants have now benefited
from re-investment, at a cost of �1m. A further 12 are under way, with a large portion of the estate benefiting from
investment before the year-end. Total anticipated spend in this financial year is �11m. The initial phase of
refurbishment of our prestige Kettners restaurant in Soho has now been concluded and its sales performance up to
Christmas was very encouraging.
A second stand-alone To Go unit was opened at London's Victoria station, and we continue to monitor this concept
carefully.
UK and Ireland Pasta restaurants
Total sales from the pasta division were up 81% at �6.7m, with operating profits of �0.2m (2001:�0.1m).
Café Pasta continues to show an encouraging performance with like for like sales increases of +8.5% in the first
quarter and +2.4% in the second quarter, making a cumulative half year total of +5.2%. The average spend per head in
these restaurants was �14.30.
Although we have been happy for some time with the broader menu, restaurant design and general operation of Café Pasta,
we felt the name did not truly reflect our offer and style. Our two new openings during this period (in Clapham and
York) therefore opened under a new name - Marzano. Both have proved successful. Consequently we have now extended this
branding to include the newly refurbished Café Pasta restaurant in Wimbledon Village and three other Café Pasta sites.
The Gourmet brand has been enhanced with both menu and restaurant design development and we continue to be pleased with
levels of sales and profits. Our first new opening was at the beginning of February in Winchester.
Retail
Our retail pizza products are now being distributed through 320 Sainsbury's and 134 Waitrose stores, as well as 7 in
Hong Kong; sales continue to perform satisfactorily, up 37% to �2.6m in the half year, with over 140,000 units being
sold each week. Operating profits were �1.4m (2001: �1.0m).
International
Our international ventures continue to develop at a steady pace, with turnover up 11% to �2.1m. Net operating losses
were �0.4m (2001:�0.5m loss). We are rationalising our international expansion and consolidating in significant
European markets in which we feel confident. In the half year a Company-owned restaurant opened in Toulouse. All our
owned and franchised operations are trading to expectations.
Financing
Group cash outflow before financing for the six months to 31st December 2002 was �2.8m (2001: inflow �5.4m). Loan notes
repayable fell from �2.8m to �2.6m. Consequently cash at bank and in hand declined from �20.8m to �17.8m.
Net interest receivable for the period was �0.3m (2001: �0.4m).
Board Change
In October 2002 David Sykes was appointed Managing Director of UK restaurants. He has 12 years' experience within the
Company, in that time successfully filling several roles, including restaurant operations for Café Pasta and Ireland,
and property. David's focus reflects our priority to improve performance throughout PizzaExpress, concentrating on our
core values of service and quality. In October 2002 James Parsons left his position of UK PizzaExpress Managing
Director and he subsequently resigned from the Board in December 2002.
Bid Approaches
As announced in December 2002, the Board has received approaches which may or may not lead to an offer being made for
the Company. The three independent non-executive directors have formed a committee which, together with the Company's
professional advisors, is managing the bid process with all interested parties. This process is well advanced and we
hope to be in a position to communicate with shareholders in the near future.
Exceptional Costs
Costs of �0.6m payable in relation to professional fees incurred in responding to potential bids have been charged to
the profit and loss account as at 31st December 2002. Further significant costs may be incurred in the period to 30th
June 2003. The exact amount of such costs will depend on whether a transaction is completed.
Current trading and prospects
Since the half year, trading conditions and like-for-like sales have not improved in the core UK pizza operation.
Immediate prospects remain uncertain. Intense price competition, coupled with well-documented economic and political
factors, continue to delay improvements in performance, but we believe the many initiatives we have taken will aid
recovery as market conditions improve.
11 February 2003
PIZZAEXPRESS PLC
GROUP PROFIT & LOSS ACCOUNT
For the six months ended 31 December 2002
Six Months to Six Months to Year to
31 December 31 December 30 June 2002
2002 2001
Unaudited Unaudited Audited
(All figures in million pounds
sterling)
Turnover (including share of joint
venture)
- continuing operations 112.0 103.5 213.5
- discontinued operations - 0.3 0.3
112.0 103.8 213.8
Less: share of turnover of joint - - (0.1)
venture
Group turnover 112.0 103.8 213.7
Operating profit - continuing 17.5 21.5 38.9
operations
Operating loss - discontinued (0.1) (0.2)
operations -
Group operating profit before 17.5 21.4 38.7
exceptionals
Exceptional costs relating to (0.6) - -
potential bids for the company
Exceptional reorganisation costs - - (0.5)
Group Operating Profit 16.9 21.4 38.2
Loss on disposal of fixed assets - - - (0.2)
continuing operations
Loss on termination of US operations - (0.7) (0.8)
Profit on ordinary activities before 16.9 20.7 37.2
interest and taxation
Net interest receivable 0.3 0.4 0.8
Profit on ordinary activities before 17.2 21.1 38.0
taxation
Taxation on profit on ordinary (5.3) (6.4) (12.4)
activities (note 2)
Profit on ordinary activities after 11.9 14.7 25.6
taxation
Dividends on equity shares (2.2) (1.8) (7.5)
Retained profit for the period 9.7 12.9 18.1
Earnings per 10p ordinary share (note
3)
- Basic 16.6p 20.6p 35.8p
- Diluted 16.6p 20.4p 35.7p
Ordinary dividends per share (note 4) 3.0p 2.5p 10.5p
PIZZAEXPRESS PLC
GROUP BALANCE SHEET
As at 31 December 2002
31 December 31 December 30 June 2002
2002 2001
Unaudited Unaudited Audited
(All figures in million pounds
sterling)
Fixed assets
Goodwill 0.4 - 0.4
Tangible assets 154.4 137.8 147.0
Investments:
In own shares 0.5 - 0.5
Other investments 0.5 0.5 0.5
1.0 0.5 1.0
Interests in joint ventures:
Share of gross assets 0.4 0.5 0.4
Share of gross liabilities - - -
0.4 0.5 0.4
156.2 138.8 148.8
Current assets
Stocks 8.0 8.5 8.4
Debtors 9.1 6.2 8.8
Cash at bank and in hand 17.8 27.4 20.8
Assets held for resale 0.9 - 0.9
35.8 42.1 38.9
Creditors: amounts falling due (34.7) (39.7) (40.1)
within one year
Net current assets / (liabilities) 1.1 2.4 (1.2)
Total assets less current 157.3 141.2 147.6
liabilities
Provisions for liabilities and (14.3) (13.7) (14.3)
charges
143.0 127.5 133.3
Capital and reserves
Called up share capital 7.3 7.3 7.3
Share premium account 61.9 61.2 61.9
Profit and loss account 73.8 59.0 64.1
Shareholders' funds 143.0 127.5 133.3
(including non-equity interests of
�0.1m)
PIZZAEXPRESS PLC
GROUP CASH FLOW STATEMENT
for the six months ended 31 December 2002
Six Months to Six Months to Year to
31 December 31 December 30 June 2002
2002 2001
Unaudited Unaudited Audited
(All figures in million pounds
sterling)
Net cash inflow from operating 19.3 27.5 46.9
activities (note 5)
Returns on investment and
servicing of finance
Interest received 0.3 0.4 1.1
Interest paid - - (0.2)
0.3 0.4 0.9
Taxation paid (4.3) (3.8) (11.6)
Capital expenditure and financial
investment
Purchase of tangible fixed assets (12.4) (14.1) (32.7)
Sale of tangible fixed assets - - 0.5
Purchase of own shares - - (0.5)
(12.4) (14.1) (32.7)
Acquisitions and disposals
Acquisition of subsidiary - - (1.5)
undertaking
Cash acquired - - 0.1
- - (1.4)
Equity dividends paid (5.7) (4.6) (6.4)
Net cash (outflow)/ inflow before
use of liquid resources and
financing (2.8) 5.4 (4.3)
Management of liquid resources
Decrease in short term deposits 0.3 0.3 0.3
with banks
Financing
Issue of equity share capital - 1.3 1.8
Redemption of loan notes (0.2) (0.1) (0.4)
(0.2) 1.2 1.4
(Decrease)/Increase in cash (2.7) 6.9 (2.6)
STATEMENT OF GROUP TOTAL RECOGNISED GAINS AND LOSSES
for the six months ended 31 December 2002
The Group had no recognised gains or losses during the period other than those reflected in the Group Profit and Loss
Account.
RECONCILIATION OF MOVEMENTS IN GROUP SHAREHOLDERS' FUNDS
for the six months ended 31 December 2002
Profit on ordinary activities after 11.9 14.7 25.6
taxation
Dividends (2.2) (1.8) (7.5)
9.7 12.9 18.1
New share capital subscribed - 1.3 2.0
Currency translations differences - - (0.1)
Net increase in shareholders' funds 9.7 14.2 20.0
Opening shareholders' funds 133.3 113.3 113.3
Closing shareholders' funds 143.0 127.5 133.3
PIZZAEXPRESS PLC
NOTES TO THE FINANCIAL STATEMENTS
for the six months ended 31 December 2002
1 Basis of accounting
The unaudited results for the six months ended 31 December 2002 have been prepared in accordance with the accounting
policies adopted in the statutory accounts for the year ended 30 June 2002.
The financial information contained in this interim report does not constitute statutory accounts as defined in Section
240 of the Companies Act 1985. The financial information for the full preceding year is based on the statutory
accounts for the financial year ended 30 June 2002, which have been filed with the Registrar of Companies. The audit
report on the statutory accounts for the financial year ended 30 June 2002 was unqualified and did not contain a
statement under Section 237(2) or (3) of the Companies Act 1985.
2 Taxation on profit on ordinary activities
The taxation charge for the six months ended 31 December 2002 has been calculated by applying the estimated effective
tax rate for the year ending 30 June 2003 of 30%. (31 December 2001: 30%).
3 Earnings per 10p ordinary share
The earnings figure used for calculating earnings per share is profit on ordinary activities after taxation. The
average number of shares for the purpose of calculating earnings per share is 71.8 million (31 December 2001: 71.5
million). The average number of shares for the purpose of calculating diluted earnings per share is 71.8m
million (31 December 2001: 71.9 million).
4 Ordinary dividends per share
An interim dividend of 3.0 pence (2001: 2.5 pence) per share will be paid on 21st March to shareholders on the register
of members on 21st February.
5 Notes to the Cash flow Statement
Reconciliation of operating profit to net cash inflow from operating activities
Six Months to Six Months to Year to
31 December 31 December 30 June 2002
2002 2001
Unaudited Unaudited Audited
(All figures in million pounds
sterling)
Group operating profit 16.9 21.4 38.2
Depreciation charges 4.9 4.3 9.7
Decrease/(Increase) in stocks 0.4 (1.0) (0.9)
(Increase)/Decrease in debtors (0.3) 0.5 (1.0)
(Decrease)/Increase in creditors (2.6) 2.3 0.9
and provisions
Net cash inflow from operating 19.3 27.5 46.9
activities
Independent Review Report to PizzaExpress PLC
Introduction
We have been instructed by the Company to review the financial information comprising the Group profit and loss
account, balance sheet, cash flow statement, statement of Group total recognised gains and losses and related notes and
we have read the other information contained in the interim report for any apparent misstatements or material
inconsistencies with the financial information.
Directors' responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been
approved by, the directors. The Listing Rules of the Financial Services Authority require that the accounting policies
and presentation applied to the interim figures should be consistent with those applied in preparing the preceding
annual accounts except where any changes, and the reasons for them, are disclosed.
Review work performed
We conducted our review in accordance with the guidance contained in Bulletin 2000/4 issued by the Auditing Practices
Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data, and based thereon, assessing whether the accounting policies and
presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as
tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an
audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit.
Accordingly we do not express an audit opinion on the financial information. This report, including the conclusion,
has been prepared for and only for the Company for the purpose of the Listing Rules of the Financial Services Authority
and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose
or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our
prior consent in writing.
Review conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial
information as presented for the six months ended 31 December 2002.
PricewaterhouseCoopers LLP
Chartered Accountants
London
11 February 2003