‘Material uncertainty’ over future of Pizza Hut’s UK restaurants

Auditors at PwC revealed in accounts published last week that the US fast-food giant’s UK franchise faced a “material uncertainty which may cast significant doubt about the… ability to continue as a going concern”.

Pizza Hut UK currently has a debt pile of £73m after posting repeated losses. The firm, which has more than 4,000 workers across 152 UK outlets, has been hit hard by soaring inflation rates and has admitted to also being heavily affected by the pandemic.

This comes as bosses at the UK Pizza Hut franchise continue to be locked in negotiations to refinance tens of millions of pounds owed to lenders and due to be repaid by April 2024.

Heart with Smart, the operator of Pizza Hut UK, has confirmed that it is currently negotiating with its lender to refinance £30.9m of loan notes and its lending covenants.

In its latest accounts filed to Companies House, the group revealed its directors were anticipating a potential breach of its covenants and had agreed a temporary revised covenant structure for 2023.

It attributed this to “unprecedented inflationary pressures” caused by the outbreak of the Ukraine war.

Heart with Smart added that it had an “excellent” relationship with lenders and expected the refinancing of loan notes to be agreed. It said it did not anticipate any breaches.

However, directors acknowledged that until the refinancing was agreed, there remained a risk that the group would not have the funds to repay its loans.

Heart with Smart acquired the UK restaurant chain from London-based investor Rutland Partners in 2018. However, in 2020, during the pandemic, the group underwent a company voluntary arrangement, leading to several store closures.