Pizza Express shares rise on profit jump: Better restaurant margins key to progress

SHARES in Pizza Express, the restaurant company, rose 4p yesterday on news of a large increase in profitability.

Pre-tax profits rose to pounds 3.1m from pounds 55,000, but the comparable figures were for a period when the business was different. Pizza Express reversed into a concern called Star Computers this time last year.

Figures for the six months to December were also flattered by a pounds 1.8m credit from the disposal of one of the old businesses.

A better guide to the progress at Pizza Express is the improving profit margin, up from 13.5 to 17.9 per cent in its restaurant business.

David Page, managing director, said profits were benefiting as the company bought out franchisees. Wholly-owned outlets earn the company more than franchises, which contribute a fixed revenue.

About half Pizza Express's 80 restaurants are franchised and half are owned. Yet only a third of the revenues come from franchised outlets.

Mr Page added that the greater number of restaurants meant that group buying power was increased and the cost of raw materials driven down.

The company plans to open eight more restaurants before 30 June and wants to add a dozen new outlets every year thereafter.

Earnings per share were 2.9p compared to 4.7p when the company was Star Computer and had fewer shares in issue. Pizza Express is paying 0.5p dividend.

Penny Freer, an analyst with Credit Lyonnais Laing, the company's own stockbroker, raised her profit forecast from pounds 4.4m to pounds 4.55m.

Pizza Express shares closed at 131p yesterday, 9p below their high. They were placed in February last year at 40p.