14 June 2019
All the Jamie’s Italian high street locations have now closed since the company entered administration following its collapse in May. Jamie’s was a brand which was once loved, but fell from grace as the casual dining sector imploded. Another Italian -led food concept, Pizza Express, has been around a lot longer, but speculation has been growing about the future of this chain which has more than 600 restaurants worldwide.
Pizza Express’ latest accounts for the year ended 31 December 2018 show pre-tax losses increasing from £32m to £55m. Total turnover grew 1.6% to £543m, although like-for-like sales were down 2%.
Although EBITDA was down 15% to £80m, the Group was cash generative in 2018 with a net cash inflow of £5m after investments in sites. The Group has substantial borrowings following the private equity deal back in 2014 when Hony Capital acquired the business for $1.5 billion from Cinven. Total borrowings in the accounts are just over £1.1 billion at 31 December 2018 (the Group has intangible assets in the form of goodwill and the brand totalling £900m).
Hony Capital, a Chinese private equity firm, has hoped to expand the Pizza Express concept into Asia, particularly China, but increased competition and innovation from local brands in China caused like-for like International sales to decline by 7.5% in 2018. Revenue in China represents 15% of the total for the Group, which is still very much dependent on the UK market. However, the Group did open 20 restaurants in China in 2018 and has also redeveloped its menu there to ensure pizza remains at its heart.
Although the balance sheet of the Group is in a net liabilities position of £112m (at 31 December 2018), the fact that the first tranche of the repayment of borrowings is not due until August 2021 should ensure that Pizza Express survives for at least the next couple of years. The big test will come when the debt has to be repaid. No doubt the vulture funds will continue to circle – the Company’s bonds are trading at around 48p, compared with 80p a year ago – with a view to getting control of the whole business at a bargain price.
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