BIG NEWS
Could debt concerns at rival help Domino’s Pizza? As Pizza Express debt weighs on the business, shares in Domino’s perk-up
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ccording 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.
Shareholder dissent remains muted Rebellions at AGMs few and far between GIVEN SOME HIGH profile corporate disasters of late, including the likes of Carillion, Patisserie Valerie and Thomas Cook, you might have expected shareholders to be champing at the bit to hold companies to account. However, data from Minerva Analytics 2019 UK Voting Review shows shareholder dissent or the proportion voting against resolutions at FTSE 350 firms’ AGMs remains pretty modest and below where it was a
decade ago at 2.95%. Beneath this headline number there are signs that investors are ‘picking their battles’, showing significant dissent in some high profile examples. Still the number of resolutions which received dissent of 20% or more according to Minerva only totalled 126 during this most recent AGM season compared with 148 in 2018. The appointment of directors and executive pay remained the hottest issues. Board resolutions
accounted for 41.3% of all high dissent resolutions and remuneration for 32.5%. Minerva includes abstentions when recording dissent on the basis that this represents showing a ‘yellow card’ to management. Interestingly the report shows that nearly 50% of the companies which have received dissent of 20% or more are repeat offenders having also received high levels of dissent in 2018.
17 October 2019 | SHARES |
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