Fears over financial future of Pizza Express

Fears are mounting over the future of popular restaurant chain Pizza Express after it emerged it has hired financial advisers ahead of talks with its creditors.

Pizza Express is reportedly seeking talks with its creditors.

It is believed the company, which launched 54 years ago and which was acquired by Chinese private equity firm Hony Captial in 2014, has around £655 million of debt - equivalent to £1.6m per restaurant.

It is thought to have appointed financial adviser Houlihan Lokey to prepare for debt talks with its creditors, sparking claims that it could be looking to negotiate rents with its landlords - or possibly enter an agreement over paying back money owed such as a Company Voluntary Agreement (CVA).

The news comes just months after rival Jamie’s Italian closed, with the loss of 1,000 jobs.

Financial consultants Langton Capital wrote on Twitter: “Pizza Express reportedly about to engage in talks with creditors.”

Jinlong Wang, group chairman of Pizza Express, said at the end of the last quarter the brand had been “pleased with the results”.

He said: “In the first half of the year, we are pleased that we have remained resilient across all our markets despite sector-wide challenges.”

Pizza Express, which opened its first outlet in Wardour Street in London’s Soho, now has more than 600 restaurants globally, including around 20 in Scotland. It also sells more than 35 million pizzas in UK supermarkets every year.

Accounts

Its 2018 accounts it reported net debt of £1.1bn, with interest charges of £93.1m, resulting in a pre-tax loss of £55m. The accounts showed that a higher UK wage bill and property costs weighed on profitability amid a testing year for the casual dining sector. It also said that the loss was partly down to challenges in some of its less developed international markets, including China where it has been pursuing an expansion of the brand.

Leigh Sparks, professor of retail studies at Stirling University, said: “The cost of doing business is a major issue right hnow and there is no reason that Pizza Express would be immune to that. The rise of Just East and Deliveroo is also a problem. While in some ways, it eidens the market, it also makes people think ‘Should I goout tonight? No’ and they have a wider choice of food to order at home.”

Tim Symes, head of restructuring and insolvency at law firm DMH Stallard, said: “Pizza Express may just be the latest high street name to be at risk of succumbing to the pincer movement of high rents and changing consumer habits that has already seen off so many high street staples of late.

“Even restaurants cannot escape the on-line revolution, due to the rising dominance of the delivery apps and the vast choice, and therefore competition, they offer.”

He added: “It has been reported that is Pizza Express is set to hire advisers to help them negotiate with their creditors. I expect they will start by talking to their landlords to invite them to reduce their rents on premises, an invitation which may be hard to resist if the alternative is a potentially vacant unit.

“Unless they can get enough suitable deals informally with landlords and other creditors, then a Company Voluntary Arrangement, most recently used by Jamie’s Italian, Prezzo and Byron Burger, may well be on the cards.”

Unite the Union said: “Worrying news that Pizza Express is in trouble. Solidarity to the workforce. There must be no repeat of the mess made of Jamie’s, Thomas Cook and others where workers kept in dark and out of pocket while boardroom looks after itself.”

Fans of the chain expressed their fears over the chain’s future.

TV presenter Jake Humphrey wrote: “People who aren’t bothered about Pizza Express folding have never been in a town they don’t know, at 3pm, with two screaming, hungry kids & a headache...”