\u00a3465m of senior debt matures in August 2021<\/li>\n<\/ul>\nThe high street is an ever-changing environment with more and more disruption from players like JustEat, UberEats and Deliveroo transforming the way in which consumers are dining.<\/p>\n
Consumers dining at home means the group is losing out on high-margin drink sales, which is cutting into overall margins. EBITDA margins at Pizza Express have eroded significantly over the past years (2018: 14.8% compared to 2015: 21.8%) but interestingly they are still higher than Jamie\u2019s Italian had ever been (in 2014 and 2015 a peak of 11.4%).<\/p>\n
Just like Jamie\u2019s Italian, Pizza Express operates both an equity and franchise restaurant model. However, Pizza Express has done well to maintain relevance and diversify its distribution model.<\/p>\n
In the UK they teamed up with Deliveroo in 2018 and Welcome Break. Not only are they adapting to the changing landscape but they are also diversified through their retail operation too (they sold 32 million fresh and frozen pizzas in 2018 through their supermarket channel).<\/p>\n
The market for Pizza Express is far wider than Jamie\u2019s Italian was, given the average cover price. It\u2019s much more accessible and they are experiencing significant growth in China, a key growth market for them.<\/p>\n
Overall, Pizza Express know their market and it\u2019s much wider than it was for Jamie\u2019s. You can walk into any Pizza Express and get a consistent experience with a known quality level.<\/p>\n
The combination of a heavily leveraged buyout and chasing aggressive growth in China has put a burden of debt on the business. Both the debt (\u00a31.1bn) and interest (\u00a393m) numbers are alarming relative to revenues (\u00a3543m), profit and net assets.<\/p>\n
The big issue is that \u00a3465m of senior secured debt is traded on the Irish Stock Exchange and matures in August 2021. Another \u00a3200m is unsecured and matures in August 2022.<\/p>\n
The secured debt is trading at 85% face value, but the unsecured debt is trading at 25% face value, implying the market thinks the bondholders could gain control of the company and the unsecured holders could lose out.<\/p>\n
However, if you dig a little deeper, a good proportion of this is payable to the parent. The parent company debt is \u00a3307m with an additional \u00a3159m of interest rolled up into it.<\/p>\n
In fact, the parent loan interest (\u00a342m this year) is being rolled up into the capital and so the group cashflows actually had a net cash inflow in the last annual accounts. It could be argued that the parent loan interest is\u00a0akin to a dividend.<\/p>\n
Pizza Express clearly needs to work through the huge debt which is due for repayment in August 2021 but there are options. They can either restructure the debt, convert the secured debt into equity or sell, close or franchise restaurants. Or the company can inject more cash, in the form of equity.<\/p>\n
The above are the interesting facts. Their margins may be eroding but they have a healthy-ish EBITDA margin, a wide target market at a reasonably accessible price point, a consistent brand experience, a diversified distribution model and both an appetite and ability to evolve with market changes. Hope they will survive.<\/p>\n
Written by Yang Heal<\/p>\n","protected":false},"excerpt":{"rendered":"
I\u2019m guessing everybody has been to Pizza Express. They are on pretty much every high street across the country. Pizza Express was founded in 1965. The chain has since grown to over 620 restaurants globally. However, Pizza Express suddenly\u00a0hit the headlines\u00a0earlier this month with reports that they’ve hired a firm to help restructure their rather […]<\/p>\n","protected":false},"author":12312400,"featured_media":26560,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_et_pb_use_builder":"","_et_pb_old_content":"","_et_gb_content_width":"","footnotes":""},"categories":[19],"tags":[194,73,193,192],"_links":{"self":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts\/25300"}],"collection":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/users\/12312400"}],"replies":[{"embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/comments?post=25300"}],"version-history":[{"count":1,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts\/25300\/revisions"}],"predecessor-version":[{"id":26561,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/posts\/25300\/revisions\/26561"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/media\/26560"}],"wp:attachment":[{"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/media?parent=25300"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/categories?post=25300"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.outsourcedacc.co.uk\/wp-json\/wp\/v2\/tags?post=25300"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}