Wed 2nd Oct 2019 - Prezzo turnaround shows early encouragement Prezzo turnaround shows early encouragement: Prezzo, the Karen Jones-led restaurant chain, has reported solid like-for-like growth from April 2019 and hopes to have 50% of its 185-strong estate revamped by the end of this year. Propel understands the group’s management team is optimistic the company, which underwent a company voluntary arrangement (CVA) last year, will return to like-for-like growth in its current financial year. It’s understood early signs of the programme have been encouraging from sites developed so far, with 14 sites revamped in 2018. The CVA was announced in February 2018 to right-size the estate by exiting underperforming sites and concepts and allowing a renewed focus on the company’s core eponymous brand. The CVA was completed in May 2018, leading to the closure of 109 sites and exit from the group’s Chimichanga, Caffe Uno, Cleaver and MEXIco brands, leaving Prezzo with a profitable portfolio of 185 restaurants. The company’s trading performance was significantly affected by sector headwinds and the disruption of the CVA process, with revenue down from £211.6m in 2017 to £157.2m. Operating profit excluding non-trading items was a £7.1m loss (2017: £6.6m profit), while the operating loss narrowed to £29.7m (2017: £65.6m loss). This was affected by £22.7m of one-off items, including the non-cash accounting write-down of property, plant and equipment, and intangibles of £8.5m. Adjusted Ebitda stood at £3.9m (2017: £19.5m). Prezzo’s financial position was stabilised further in August 2018 through a debt for equity swap, which cut the group’s debt from £155m to £53m. The company said Jones, who was appointed executive chairman in June 2018, and the management team had completed an overhaul of its long-term focus and direction, resulting in the creation of a strategic business plan across four key pillars – people, food and drink, environment, and customer and brand. It said: “The plan is aimed at rejuvenating the Prezzo brand, driven by the core aim of ‘every customer leaves wanting to return’ by creating a better quality and more distinct customer proposition and working in line with Prezzo’s values.” To support the plan, the brand’s board and investor group have agreed to a £5m refurbishment programme covering up to 50% of the estate to be funded by an equal contribution of working capital and shareholder loans. 14 restaurant refurbishments were completed in 2018, with £3m planned for 2019. A further £3m has been set aside for investment in technology, repairs and maintenance capex during 2019. The company said customers had responded well to the refurbished sites and re-energised restaurant teams. It said: “The invested sites are performing well, ahead of their investment case and ahead of the remaining estate, with solid like-for-like growth from April 2019. Improving net promoter scores also reflect a renewed focus on guest experience, with team members undertaking additional service training in line with our aim of putting hospitality back at the heart of Prezzo.” Jones said: “Our industry has faced a tough time and Prezzo’s previous strategy of new openings and concepts distracted from its mission. A number of important mitigating actions were taken in 2018 and we’ve started 2019 with a clear plan and in good heart – focused on our people and customers, listening to them and serving them better. Our turnaround plan is at an early stage but I’m delighted with the initial results and the positive feedback from our customers and teams. Our concentration will always be on investing in our teams and ensuring each customer who walks into a Prezzo has the best possible experience. Only through this will we ensure every customer leaves wanting to return.”