Sectors > Top Reports > Pizza Express Memo 210619

Pizza Express Memo 210619

Sceptical On China EBITDA “Maturation” – Value Breaks In Senior Secured. Avoid…For Now
PUBLISHED: 21 June 2019
SUBMARKET: Pizza Express, Top Reports, Top Reports,


Why Read?

  • Understand the economics of Pizza Express’ China business
  • Understand why EBITDA maturation in China is unlikely to occur
  • Understand where value breaks in the capital structure
  • Understand whether a spin-off or sale of the International / China business to Hony could clear a path to refinancing
  • Understand why a CVA modelled on recent CVAs of other UK chain restaurants still leaves even senior secured debt impaired
  • Understand why Pizza Express’ UK (& Ireland) EBITDA margin is likely to remain structurally higher than competitors 

What’s New?

  • Analysis of Pizza Express’ China economics – revenue per restaurant relative to UK; revenue per new restaurant vs revenue per mature restaurant
  • Sensitivity analysis – what uplifts to LFL revenue growth and EBITDA margins (across UK & Ireland and International / China) are needed to cover Pizza Express’ senior secured debt; CVA scenario; International / China sale or spin-off scenario
  • Decomposition of Pizza Express’ UK & Ireland EBITDA margin decline since 2013 

Questions Answered

  • Will Pizza Express’ EBITDA margin in International / China ever move materially higher?
  • What is Pizza Express worth and what valuation does this imply for the senior secured and senior notes? 
  • Is Pizza Express experiencing downward pressure on its UK & Ireland EBITDA margin as a result of its higher price point on pizzas compared to competition?
  • How would a CVA impact Pizza Express’ value?
  • How much would Hony need to pay for the International / China business in order to give Pizza Express a realistic chance of refinancing ahead of its 2021 senior secured notes maturity?

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