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| Share Name | Share Symbol | Market | Stock Type |
|---|---|---|---|
| Pizzaexpress | PIZ | London | Ordinary Share |
| Price Change | Price Change % | Share Price | Last Trade
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|---|---|---|---|---|
| 0.00 | 0.00% | - |
| Open Price | Low Price | High Price | Close Price | Previous Close |
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| Top Posts |
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Posted at 14/3/2003 19:56 by daytona2 Latest Analyst Investor bulletin from www.analystinvestor.PizzaExpress plc Bulletin No. 1 Friday 14th March 2003 The first closing date of Venice Bidder's offer for PizzaExpress plc is Thursday, 20th March. The stockmarket is saying that the bid of 367p per share (equating to a value of approximately £263m for the entire business) is not going to succeed, although the market price has been weakening over the past few days. There has been speculation in the press that Nando's and its backers are planning to make a bid for the company at around 387p per share. In our view, neither of these approaches remotely reflects the true economic value of the company and they should be rejected by all share-owners out of hand. We have made our position on value-maximisation crystal clear. We favour a substantial share buy-back, we want the business to continue to be run by the present managers, a new management incentive scheme implemented, the resignation of the non-executive directors and the appointment of a new heavyweight chairman. We plan to examine aspects of the PizzaExpress story each day now in the run up to the first closing date of Venice Bidder's offer. There are a number of serious misconceptions about the business that are based on unsubstantiated opinion. These need to be corrected by fact. In addition, investors' and press commentators' attention needs to be drawn to a number of what we believe to be totally unacceptable aspects of the PizzaExpress bid saga since this current phase began on 16th December 2002. Our first task is to refute the frequently used description of PizzaExpress as 'beleaguered' 'struggling' and 'underperforming'. You would think, reading the financial press, that this is a basket case whose only future lies in a rescue bid. This is abject nonsense. Let's look at the reality: · In the year ended 30th June 2002, the UK and Ireland pizza restaurant chain generated revenue of £195.2m and operating profits of £40.1m. That represents an operating margin of 20.5% - down from the 24% of 2001, but still a well-above-average performance. Of the 300 restaurants open at the 2002 year-end, 27 were opened during the year and would, inevitably, have generated a below average turnover and operating profit. · Reported profits after tax in 2002 were £25.6m. This still represents a 16% return on average shareholders funds adjusted for historic goodwill written off. · At the 2002 balance sheet date, the company had cash of £20.8m and no debt. Free cash generation was over £6m, even after capital expenditure of £32.7m. · In 2002, the Sunday Times named PizzaExpress as one of the top 100 companies in the country to work for, the only restaurant operator to make it onto the list. · In the 6 months to 31st December 2002, the UK and Ireland pizza restaurant chain generated revenue of £100.2m and operating profits of £17.1m, reflecting an operating margin of 17.1%. The adjusted return on equity in a poor half was 13.4%. · At 31st December 2002, the company had cash of £17.8m and no debt. · The interim dividend was increased by 20%. Does this sound like a struggling or beleaguered business to you? We run a very detailed operating model of the UK pizza restaurant business. Our model splits the chain into restaurants by age: (a) those over 15 years, (b) those aged between 10-15 years, (c) those aged between 2-10 years, and (d) those under 2 years. The older restaurants - those over 10 years old - are under income and margin pressure, but they are neither struggling nor losing money. The 37 UK pizza restaurants that are more than 15-years old are located mainly in and around London. The first PizzaExpress was opened in Wardour Street in 1965 and until Kingston opened in 1976 some 11 years later, all openings were in London with the exception of St. Helier in Jersey, which was opened in 1970. As a group, these are the most prolific restaurants in the chain. On our model, the average revenue of these mature restaurants was around £1.02m in 2002 and their average operating profits were around £290,000, reflecting a very high operating margin of 28.2%. We are projecting the like-for-like revenue of these units will decline by 10% in 2003 to some £930,000 with average operating profits at £250,000. So, a £93,000 reduction in sales causes a £40,000 drop in profits – or a fall of 13.8%. Put another way, 43p of operating profit is lost for every £1 drop in sales. The refurbishment programme, which is underway in 140 out of 311 restaurants, aims to restore those lost sales. Once those revenues are restored, profits will be restored disproportionately. (The ages of the UK restaurants are difficult for an outsider to pinpoint precisely. Only 16 restaurants originally opened by the company were more that 15-years old as at 30th June 2002. However, 32 franchised restaurants were bought in by the company on 11th November 1996, many of which had opened their doors before June 1987. We do not have precise opening dates for these.) These 15-year old plus restaurants are a very material part of the overall group revenue and profit totals. On our estimates, these 37 restaurants (12% by number at that time) contributed £38m of revenue (19%) and £10.7m of operating profit (25%) before central overheads in 2002. There have been calls from uninformed investors and some press commentators to 'close the under-performing Central London restaurants', or sell them. But, as you can see from the above, this is crazy advice. The second group of restaurants, those between 10-15 years old, are also important contributors to group turnover and profit. On our estimates, there were 29 of these trading in 2002. Our model shows an average restaurant in this category generated around £865,000 in revenue and £225,000 in operating profit. We have, again, projected a like-for-like decrease in sales in 2003 of 10%, so average sales would fall to £785,000 and operating profits to £193,000. An £80,000 fall in sales here causes a £32,000 drop in operating profits – once again, some 40p of operating profit is lost for every £1 of sales foregone. This group of restaurants will be the powerhouse of group results in future years. In 2002, it contributed 15% of the pizza restaurant chain's operating profit. By 2010, on our estimates, it will contribute over 50%. The negative effect on the group results is clear if you look at the combined impact of these two pizza restaurant groups. In 2002, we estimate they jointly contributed £62.9m of revenue and £17.2m of operating profit. In 2003, we estimate they will contribute £58.2m of revenue and £15.1m of operating profit, £2.1m less than in 2002. The following management actions have been taken to restore these units to their former levels of profitability: 1. The introduction of a new menu and larger pizzas; 2. Holding prices: there has been no menu price increase since June 2001; 3. Dropping the advertising campaign that ran in 2002 and cost £1.2m; 4. Re-organising the operational management structure of the pizza restaurant chain; 5. Accelerating the capital investment programme in the 140 restaurants that are over 5-years old. Most of these will attract some refurbishment over the next two years at an average cost of £75,000. This Bulletin shows clearly the impact of falling like-for-like sales on group operating profits in the older restaurants, and the action management has taken to restore profits to previous levels. A restoration of profits in these restaurants would lead to an improvement in the company's economic value and ultimately a higher stockmarket price. Do not allow the benefits from this action to be stolen away from you by Venice Bidder or by any other opportunistic third party. Reject Venice Bidder's approach. We will look at the projected performance of the newer restaurants in Monday's Bulletin. Jeremy Utton Analyst Investment Management plc 14th March 2003 |
Posted at 28/2/2003 10:12 by l2e Good morningbigboyo....it is anoying that these deals are made without the private investor in mind.....private investors are just used to create a tiny bit of liquidity and volitilty in some of the lse's stocks....which the big guys just pick off and push down when they feel like.....but notice how deserted the market is getting on lowere volumes...if it carries on more will depart....those isas are going to be a blow out this year.....the punter will be back but only if a major bull appears////whats the chance of that right now! |
Posted at 22/11/2002 08:49 by m.t.glass "..Dealers believe investors face the prospect of further bad news at the next quarterly trading update in January. The latest talk suggests that the decline in like-for-like sales for its core pizza brand in the UK has risen from the 4.4% revealed last month to closer to 6%.." (nothing-ventured.coL2 shows all 10 MMs moving the price downwards in turns today. |
Posted at 22/11/2002 08:47 by m.t.glass "..Dealers believe investors face the prospect of further bad news at the next quarterly trading update in January. The latest talk suggests that the decline in like-for-like sales for its core pizza brand in the UK has risen from the 4.4% revealed last month to closer to 6%.." (nothing-ventured.coL2 shows all 10 MMs taking turns to move their prices downwards today. |
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