Pizza Express has reported a 24% rise in pre-tax profits for the year.
Pizza Express is performing well in the UK, but international operations continue to make a loss. Even though the underlying foreign businesses seem to be making money, the ongoing acquisition of franchises will continue to depress international profits. Still, this strategy should eventually result in real profits being made internationally.
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UK restaurant chain Pizza Express on Tuesday reported a 24% rise in pre-tax profits for the year. Pre-tax profits for the year to June rose to GBP40 million ($58 million), up from GBP32.2 million the previous year. Turnover rose to GBP185.6 million ($269 million), up from GBP150.1 million the previous year. The pasta and pizza chain now has 286 sites in the UK and Ireland. It eventually wants to own 500 sites in the UK and Ireland and plans to open 35 restaurants during the next year.
The company is also developing its restaurant presence in France, to accompany its core international sites in Japan, Spain and the US. It opened 38 new restaurants during the year around the world, and now sells pasta and pizza in 17 countries. International growth will continue, with a mix of company-owned and franchised restaurants. Company-owned restaurants will be opened in France, Japan and Spain.
As expected, the increased emphasis on company-owned restaurants abroad has resulted in a loss for the international operation of GBP1.5 million on turnover of GBP2.6 million as the company buys up its franchises. One company-owned and seven franchised restaurants were opened abroad during the year, with another two company-owned restaurants planned for Barcelona and Valencia in Spain. In Japan, the single company-owned restaurant continued to prosper, and central overheads have recently been reduced. In January 2001 the company took the opportunity to buy out its US joint venture partner. It also closed five loss-making franchised restaurants in Egypt.
Pizza Express is committed to its international expansion and has reduced its risk by initially entering new countries with franchises and once successful, buying those companies. But at present, while many of the underlying businesses seem profitable, the company’s continued investment in acquiring franchises has wiped these profits out. Once the number of company-owned restaurants abroad is greater than the franchises, the international operations will begin to add to profits for shareholders.
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