Prezzo (PRZ): The food chain

Tuesday, Nov 13 2012 by

From the wilderness of the last three companies I've looked at, I've jumped back into something I'm more familiar with. No more structural steel or horse-racing bookie services, here's one even I can understand at first glance - Prezzo (LON:PRZ) , the restaurant chain. If you live around the south of England, you've probably got a few near you and you might've even been to one. They do the sort of casual Italian-esque fare that's been rather a driving force of the restaurant industry (at least from my casual observation!) recently, and look like a genuine recent start-up to success story. They were admitted to the AIM in 2002, raising a rather humble £1.5m and valuing the business at £3.7m.

The history of its formation is interesting, too; one of the things that first catches your eye on the admission document is that the joint managing director (now CEO) was 22 when he co-founded the company. A little further digging - or a touch of knowledge on the Kaye family name if you're more worldy than I, I suspect - would dig up that the myriad connections. Golden Egg, Garfunkel's, Ask, Zizzi; all restaurant chains related to the family.

Back on Prezzo, though - their growth story is pretty obvious if you take a look at the graph to the right, where I've added a new line showing the number of restaurants they've opened. I suppose it shows a decent choice of premises, given how tightly operating profit and the number of restaurants are linked. Indeed, operating profit hovers between £80k and £90k per restaurant, though revenue does seem to be on an upward trend. Putting those two together leads to the obvious conclusion that margins are tightening. That is indeed the case; though perhaps there is a nod towards the direction of saying that we can expect restaurant margins to be squeezed in a recession. I'm not hugely swayed by that train of thought, but I suppose it could be worth the few percentage points that are in this. 

There's no sign of a let up, either, with the last half-yearly anticipating another 25 restaurants this year (27 last). Full steam ahead; and it makes sense, given that it's working so far, and benefits usually come with scale. That seems particularly the case in the restaurant…

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Prezzo Limited, formerly Prezzo plc, is a United Kingdom-based company, engaged in the operation of restaurants. The Company’s trading brand Prezzo offers a menu with a variety of pizza, pasta, salad and grill dishes with an Italian flavour. There were 237 restaurants in the Company’s estate. more »

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The Restaurant Group plc is a United Kingdom-based company, which operates over 500 restaurants and pub restaurants. The Company operates through operating restaurants segment. Its portfolio covers a range of categories, including table service, counter service, sandwich shops, pubs and bars. The Company's principal trading brands include Frankie & Benny's, Chiquito and Coast to Coast. The Company's Frankie & Benny's brand offers classic American and Italian style food and drinks. The Chiquito menu offers a range of authentic Mexican and Tex-Mex dishes. The Coast to Coast offers classic American food, such as double burgers, stone-baked calzones, distinctive steaks, amazing seafood dishes and South-West American specials. The Company also operates a concessions business, which trades principally at the United Kingdom airports. The Company's concessions business develops partnerships to deliver catering solutions that meet the needs of its clients and clients' customers. more »

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About ExpectingValue


Private investor turned hedge fund analyst, looking predominantly at global small caps. Sector agnostic.


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