As Pizza Express debt weighs on the business, shares in Domino’s perk-up
Thursday 17 Oct 2019 Author: Martin Gamble

According to press reports popular casual dining company Pizza Express is under pressure over its financial position and any resulting retrenchment by the chain could relieve some of the competitive pressure on listed pizza takeaway firm Domino’s Pizza (DOM).

Pizza Express has hired adviser Loulihan Lokey ahead of talks with creditors who hold £465m of debt due for repayment in 2021 and a further £200m in the following year. In total the company has £607.7m of net debt.

The chain has denied that it has any plans to close any branches and insists that most are profitable.

Founded in 1965, Pizza Express operates from 620 restaurants in the UK and Asia and was purchased by Chinese firm Hony Capital in 2014, for a reported £900m.

The 2022 bonds were trading around 23p which suggests extreme stress. Bonds mature at par value, or 100, so the face value of 23p implies that £100m worth of bonds can be purchased for just £23m.

The huge debt burden is squeezing the company as it costs around £93m a year in interest payments, wiping out earnings before interest, tax, depreciation and amortisation (EBITDA).

Add to that increasing wage pressure on the UK high street combined with overcapacity in the casual dining trade and it is easy to see why there might be widespread concerns.

Domino’s is much more conservatively financed with net debt to EBITDA of 2.2 times, compared with the 7.6 times at Pizza Express.

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