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Profits rise at PizzaExpress

PIZZAEXPRESS yesterday pledged to continue its aggressive restaurant opening programme, despite seeing a sharp slowdown in sales in the first half of the year.

The company, which brought thin-crust pizzas to the masses, plans to add at least 15 outlets over the next six months, in addition to the 16 eateries opened in the first part of the year. The openings will bring the total number of restaurants in the UK and Ireland to over 200, compared with just 65 five years ago. "In 1985, the most distant PizzaExpress from London was Bristol. In 1999 our pizza will be enjoyed in restaurants from Aberdeen to Plymouth," the chairman David Page said.

His comments came as the company reported a 40 per cent rise in interim pretax profit to pounds 13.2m. The rise came despite a slump in sales growth. Like-for-like sales increased by 3 per cent, down from around 10 per cent last year, as the difficult economic conditions kept customers away from the restaurants. The company's Pasta di Milano and the recently- acquired Cafe Pasta outlets were also disappointing and failed to contribute to profits.

The chief executive, Ian Eldridge said he was not worried by the gloomy economic outlook. "I don't see any worsening of underlying demand. There is still money in people's accounts even though customers are a bit more careful these days." Mr Eldridge maintained that the economic downturn had pushed rents down, helping the company to reduce costs and boost margins.

City analysts noted that the company was less exposed to the economic vagaries than some of its rivals because its meals were cheaper. "The average spend per visit is quite low - around pounds 10 - and they could even benefit if people trade down from more expensive offerings," one observer said. According to Ian Berry at broker Beeson Gregory, PizzaExpress shares, which fell 7.5p to 747.5p yesterday are a "buy".

He said the stock, on 23 times 1999 earnings forecasts of around pounds 29m, should be boosted by PizzaExpress's good short term growth prospects. "The company is going to grow because they have a good track record, a simple formula and very strong cash-flow thanks to good margins."

A large slice of future growth will come from abroad, as PizzaExpress plans exporting its successful formula overseas in an effort to move away from the saturated UK pizza market.

The company has outlets in a number of overseas countries - including Egypt, Cyprus and India - and wants to have over 100 restaurants outside Britain within four years.