TIDMMEX
RNS Number : 2299U
Tortilla Mexican Grill PLC
27 March 2023
27 March 2023
Tortilla Mexican Grill plc
("Tortilla", the "Group" or the "Company")
Audited Annual Results for the 52 weeks ended 1 January 2023
Publication of Annual Report & Accounts and Notice of Annual
General Meeting
A year of significant growth and further strategic progress
Tortilla Mexican Grill plc ("Tortilla"), the largest and most
successful fast-casual Mexican restaurant group in the UK, is
pleased to announce its Annual Results for the 52 weeks ended 1
January 2023 (the "Period").
Financial highlights
-- Revenue increased by 20.0% to a new record of GBP57.7m (FY21:
GBP48.1m), driven by a record year of new site openings.
-- Like-for-like ("LFL") revenue up 16.4% vs 2019.
-- Adjusted EBITDA (pre-IFRS 16) was GBP4.0m (FY21: GBP8.7m).
Notably, FY21 included GBP3.9m of VAT benefit.
-- Gross profit margin was 76.4% (FY21: 79.6%).
-- Net debt was GBP0.6m (FY21: net cash of GBP6.7m).
Operational highlights
-- Year of record growth for the Group with 18 sites (net) added
to the portfolio, increasing the total number of sites to 82 at the
period end
-- A record number of UK new openings, with ten Group-operated
sites added, as the Group takes advantage of the favourable
property rental market
-- Excellent franchising proposition due to simplicity of
operating model and flexible store format
o Five franchise sites opened in universities through new
partnership with Compass Group plc
o One further airport site opened at Bristol, through franchise
partnership with SSP Group plc
-- Strategic acquisition of Chilango in May 2022 strengthened
the Group's market position in London:
o Five of eight new sites converted to Tortilla branding
o Three remaining sites refurbished post-acquisition
-- Relaunched Tortilla Club loyalty scheme, growing loyalty
programme by circa 40% to more than 280,000 members.
-- Expanded successful partnerships with delivery partners
Deliveroo, Uber Eats and Just Eat, alongside new partnerships with
delivery kitchen partners including Growth Kitchen and Karma
Kitchen.
-- Strengthened Board and management team, with the appointments
of Francesca Tiritiello (Non-Executive Director), Holly Foot
(People Director) and Andrew Brook (Head of IT).
Current trading & outlook
-- Trading in line with expectations. LFL sales growth for the
eight weeks to 26 February 2023 remained strong, up 4% vs FY22 (up
11% vs FY22 when adjusted for VAT).
-- Action taken by management across supply chain to manage
costs and aid profitability, including utilities hedge (Apr-Sep
2023), providing certainty for the majority of FY23. Food cost
inflation rates have largely plateaued.
-- New sites opened in Q1 FY23 in Derby and Greenwich (London)
have seen encouraging early trading, with a healthy pipeline of
further openings planned for later in the year including in Milton
Keynes, Belfast and Bracknell. Ahead of schedule with our targeted
ambition, stated at IPO, of 45 new sites in five years.
-- Exploring several new franchise sites for 2023 to enhance
diversity of locations, including through the expansion of existing
partnership with Compass Group and further planned openings at rail
stations with SSP Group.
-- Technology investments to enhance customer service and
reporting efficiencies, to better support the Group's growth
strategy and customer loyalty.
-- The Board remains confident in the Group's ability to perform
in line with market expectations for FY23*.
Richard Morris, Chief Executive Officer of Tortilla,
commented:
"We have a proven, great value, and highly popular customer
proposition and these strengths continued to underpin our good
levels of like-for-like growth and further strategic expansion
during 2022.
More and more consumers are seeking out high-quality, healthy,
customisable food at great value, and both of our brands - Tortilla
and Chilango - sit at the heart of these exciting consumer trends.
The strong performances of our restaurants up and down the country
as well as the success of new openings in the likes of Lincoln,
Coventry, Canterbury, and Leicester once again demonstrate the very
broad appeal of our proposition and the demographic diversity in
which we operate and succeed.
As well as our continued expansion across the UK, we further
strengthened our market position in London through our strategic
acquisition of eight Chilango restaurants in the first half of the
year. We successfully converted five of these to the Tortilla brand
and have refurbished the three remaining Chilango sites. All these
sites are benefiting from increased footfall in London.
The beginning of 2023 has started well with like-for-like sales
up 4% in the 8 weeks to 26 February. We know that restaurants that
offer great, consistent food at competitive price points will
always be the winners in our sector, and we are confident that we
sit very comfortably in this space. We remain highly motivated and
excited about Tortilla's continued growth potential in the UK as
well as our opportunities to build on our proven franchise
operations to expand overseas."
* Company-compiled consensus: FY23: revenue GBP69.8m, Adjusted
EBITDA GBP5.0m. Adjusted EBITDA defined as statutory operating
profit before interest, tax, depreciation and amortisation (before
application of IFRS 16 and excluding exceptional costs) and
reflects the underlying trading performance of the Group.
Publication of Annual Report & Accounts and Notice of Annual
General Meeting
Tortilla Mexican Grill plc will publish later today its annual
report and accounts for the financial year ended 1 January 2023
(the "Annual Report"), including the Notice of Annual General
Meeting. These documents shall be available today on the Company's
website.
The Company's Annual General Meeting will be held on 17 May 2023
at the offices of Liberum Capital Limited, 25 Ropemaker Street,
London, EC2Y 9LY.
ENQUIRIES
Tortilla Mexican Grill PLC Via Hudson Sandler
Emma Woods, Non-Executive Chair
Richard Morris, CEO
Andy Naylor, CFO
Liberum Capital Limited (Nominated Adviser, Tel: 020 3100 2222
Sole Broker)
Andrew Godber
Edward Thomas
Nikhil Varghese
Hudson Sandler (Public Relations) Tel: 020 7796 4133
Alex Brennan tortilla@hudsonsandler.com
Wendy Baker
Charlotte Cobb
For further information , visit tortillagroup.co.uk
NOTES TO EDITORS
About Tortilla Mexican Grill plc
Tortilla is the largest and most successful fast-casual Mexican
restaurant group in the UK specialising in the sale of freshly made
Californian-inspired Mexican cuisine. As at 1 January 2023, the
Group had 82 sites worldwide, comprising 65 sites in the UK
operated by the Group, 4 sites franchised to SSP Group in the UK, 5
sites franchised to Compass Group UK & Ireland and 8 franchised
sites in the Middle East.
The Group was founded in 2007 by Brandon Stephens, originally
from California who arrived in London in 2003 to find a gap in the
market for quality burritos and tacos. As a result, Brandon
established Tortilla with a mission of offering customers freshly
prepared, customisable, and authentic Californian-inspired Mexican
food.
The Tortilla and Chilango brands are synonymous with an
energetic, vibrant culture, and with providing a great
value-for-money proposition. They embrace fast-growing sector
trends (including eating out, healthy eating, provenance, ethnic
cuisine, delivery) across a variety of locations, through a
differentiated product offering which is popular with a broad
customer base, and a clearly defined multi-channel marketing
strategy. It benefits from flexible site locations and formats, and
a scalable central infrastructure.
CHAIR'S STATEMENT
Tortilla's last annual report was published shortly after the
start of the war in Ukraine. Back then, little did any of us know
the extent to which this geopolitical event would come to shape our
year, due to the unprecedented levels of food and energy inflation
impacting businesses and consumers. The Group has a
long-established reputation for providing a high-quality and great
value for money proposition and the Management team has worked hard
to mitigate some of these cost pressures. We have resisted passing
on all additional costs to our valued customers through price
increases and jeopardising our key value for money score. However,
taking this necessary long-term view has inevitably impacted the
Group's short-term EBITDA margin and annual profits.
I want to thank you, our shareholders, for your
understanding.
The Board has been determined that the business arises from this
challenging period in a strong manner and is ready to take
advantage of the economic recovery. Accordingly, I am pleased to
report a number of excellent achievements delivered in the
year:
1. We continued our successful UK organic rollout of sites,
opening ten new Group-operated sites, including our first sites in
smaller cities like Leicester and Coventry. Early trading has been
encouraging in these new locations.
2. We acquired Chilango Ltd, which comprised eight additional sites, seven of which are in London strengthening the Group's market position. We have converted five of these sites to Tortilla branding, which supports our confidence in London as office working returns.
3. We commenced a franchise relationship with Compass Group,
with five university sites now open, ensuring our key 'student'
audience gets to know the brand.
4. We opened a further airport site with SSP Group in Bristol,
in time for the summer holidays, which illustrates the relevance of
the brand in super high footfall hubs.
5. We strengthened our Management Team with the appointment of a
new Operations Director, Stephen Clark (ex-Whitbread plc), People
Director, Holly Foot, and Head of IT, Andrew Brook.
6. We relaunched our loyalty scheme - Tortilla Club - to enhance
active customer engagement and have already seen good uptake. This
scheme has also helped to support customers through the
cost-of-living squeeze.
Board Changes
You will read in this report that our franchise business, both
in the UK and in the Middle East, is flourishing and we are keen to
explore how we can exploit strategic partnerships like this to
expand quickly using less capital. I was delighted that Francesca
Tirtiello, who has 20 years of European franchising experience,
joined the Board as a Non-Executive Director and Chair of the
Remuneration Committee in 2022.
In other changes, Laurence Keen, has recently taken on leading
the expansion of Hollywood Bowl in Canada. Given the time and
travel demands of this new role he has decided to not seek
re-election at the AGM. The Board would like to thank Laurence for
his support since IPO.
Francesca Tirtiello will now take over as Chair of Audit. We
have begun recruitment for a new Non-Executive to chair the
Remuneration Committee and will update you when we make this
appointment.
2023 - a great value proposition
Our shareholders will undoubtedly have read about consumer
spending on 'eating out' being under pressure. However, the Group
has been monitoring customer behaviour closely over the last six
months, and we remain confident that our great value proposition
will give the Group resilience as people seek value-for-money
options. After all, we continue to serve customers great fresh food
and a drink, in a fun and vibrant atmosphere, at competitive
price.
Finally, I have really enjoyed meeting several of our
shareholders last year. So, alongside the dialogue you have with
Richard and Andy, please feel free to contact me if you would like
to discuss our business at any point.
Emma Woods
CHAIR
27 March 2023
CHIEF EXECUTIVE OFFICER'S STATEMENT
The Group was in fantastic shape as we entered 2022, following
record performances achieved across our estate in 2021, having
navigated the post Covid-19 environment and opened a record number
of new sites.
This strong performance continued into 2022 until the UK was
presented with several macro-economic challenges following
Russian's invasion of Ukraine, which led to unprecedented levels of
food and energy inflation. This set the business on a different
footing for the rest of the year, as careful supply chain
management became essential to the operation of the business.
However, Tortilla has a strong track record of resilience. The
business has proven to be dynamic and able to quickly adapt to
economic downturns, and 2022 was no exception. We have been able to
capitalise on the opportunities afforded by the commercial property
market for example, enabling us to continue to grow our footprint
across the UK by stepping up our site rollout. We were also able to
secure more favourable terms with landlords on our new sites. The
Group's growth was further accelerated by the strategic acquisition
of Chilango Ltd, which contributed a further eight sites to the
estate.
Chilango acquisition
Chilango was one of our strongest competitors in central London.
As an award-winning fast-casual restaurant chain specialising in
Mexican food, Chilango is a well-known and complementary premium
brand with high levels of customer loyalty. The Group acquired the
business in May 2022 to fast track our presence across London,
particularly ahead of the anticipated return to office-based
working in the capital.
As Covid-19 restrictions were lifted and businesses increasingly
encourage employees to return to the office, we have seen demand in
central London bounce back strongly, and we are confident that this
demand is here to stay.
In line with our strategic plans following the acquisition, five
Chilango sites have been re-branded to Tortilla. We have seen
improved trading performances at these sites following conversion,
which demonstrates the strength of the Tortilla brand and the
success of the efficiencies found by utilising the Group's
operating model.
Three acquired sites have remained as Chilango branded sites,
and we have invested in refurbishment projects at these sites which
were completed in early 2023. It is early days for these stores
post-refresh, however the initial indicators are promising.
The complementary Chilango brand provides an excellent further
growth opportunity for the Group in the years ahead and we are
excited to see where the brand takes us.
New site pipeline
Since IPO, the Group's primary growth strategy has been to
organically accelerate its presence across the UK, seeking to open
45 new sites over five years. I am thrilled to say that a grand
total of 18 new sites opened in 2022, including the Chilango
conversions previously outlined, and we are well on track to meet
our five-year target. This is a huge triumph given the challenging
economic landscape.
We have seen a significant increase in the availability of
viable units in key target locations across the UK, and the Group
has capitalised on this by securing favourable lease terms with
landlords, not only in the form of lower rents but also often with
incentive packages included to support capital expenditure. By
securing such units and terms we are confident that we will
continue to reap the rewards that these sites have to offer for
years to come.
Looking forward, the Group is well-positioned to expand further,
and we are continuing to have a strong pipeline of new sites for
this year and beyond. In Q1 2023, we opened a further two new sites
with positive early indicators. The Group is on track to open
between 10-12 new sites in 2023.
Franchising and Partnerships
A flourishing aspect of our business is the world of
franchising. We have continued to strengthen our relationships with
our existing partners, SSP and Compass Group, which led to six new
sites opening in 2022 across the UK. Five of these were with
Compass Group located in higher education UK campuses at Brunel,
Swansea, Middlesex, Sussex and Salford, following a successful
trial early in the year. We opened one further site with SSP Group
at Bristol Airport which delivered a fantastic performance. Other
travel hubs such as Gatwick Airport achieved a record sales
performance, proving that busy travel locations are well suited to
Tortilla's operating model.
Our UK franchise manager relocated to the Middle East to help
grow our franchise partnership in the region. This provides us with
great comfort for the future prospects of the business, with a
'home-grown' Tortilla expert working directly to identify new site
locations.
Last year we reshuffled our estate of delivery-only kitchens by
expanding further with Growth Kitchen and commencing a new
partnership with Karma Kitchen. We also expanded our partnerships
with delivery partners, adopting a multi-platform approach.
Supply chain
One of the key pillars of Tortilla's success has always been our
strong relationships with our suppliers, and in 2022 this became
more critical. Early in 2022, we encountered unprecedented levels
of food inflation, and it became essential for us to work
diligently with our suppliers to ensure that operations were not
disrupted. It is a testament to the strength of our supplier
relations that we were able to maintain 100 percent menu
availability throughout the year despite the numerous challenges
presented.
In the meantime, as the reality of the cost-of-living crisis in
the UK set in, we recognised the importance of our competitiveness
in terms of pricing. To help mitigate this, we looked for other
ways of delivering on profitability. We provided top line sales
incentives for employees to boost sales volumes at our peak times
and implemented tighter controls around expenditure. Full menu
reviews were conducted to ensure that the most suitable recipes and
ingredients were being used at any given time in the rapidly
changing environment. Pricing will remain closely monitored and
under review.
Where our prices did increase, the sensitivity of such rises was
closely monitored to ensure that the spending habits of both
existing and potential customers were not impacted. We were also
proud to have kept our price rises below inflation and maintain our
competitive price position. We managed to strike the right balance
of maintaining reasonable margins without pricing our customers out
of our great value offer.
Looking forward to 2023, supply chain management continues to be
a key focus area. As we navigate the current economic environment,
we will continue to optimise what is within our control whilst
continuing to work with suppliers to find cost efficiencies.
People Values and Culture
In September 2022 the Group published its first ESG report,
setting out its sustainability commitments and vision for the
future.
People are at the core of Tortilla's success. Our ongoing
commitment to our people is evident in the career progression of
our General Managers, of which 40% have risen through the ranks and
have been promoted into their current role in the last year.
The Group recognises that our General Managers form the very
foundation of the business and to reflect this, we offer an
excellent benefits package. This includes a paid sabbatical for
General Managers who serve in the role for five years and bonus
payments for mystery diner scores, as well as competitive pay rates
for all team members.
In 2022, we recruited Holly Foot as our People Director. She is
focusing on enhancing our manager training and development
programme, in line with our drive to grow from within. Her role is
incredibly important in the context of the current recruitment
environment, and we are confident that Holly's expertise will help
us to attract and retain the best talent in the industry.
Our Annual Conference was held in February 2023 to celebrate the
successes of the business and the individuals within it. It was a
hugely motivational and positive day, with the vision of the
business shared with all our Head Office and General Manager
teams.
Technology
Technology will be at the forefront of our customer service
offering and will also be used to implement more efficient
reporting procedures across the business moving forward. This will
help us to drive more positive relationships with employees and
customers alike.
In March 2023 we were delighted to welcome our new Head of IT to
the Group. This newly-created role was made to enable us to move
forward with our technology strategy, and we look forward to
providing updates on this crucial business area in the coming
months.
International
Tortilla is already the largest fast-casual Mexican chain in the
UK & Europe and Mexican cuisine continues to grow in popularity
across the globe. We are committed to furthering Tortilla's UK
growth story, though we are simultaneously aware of the huge
opportunity for a leading Mexican fast-casual brand to thrive
across continental Europe.
The Group continues to seek out new businesses and partnerships
as we develop our European growth strategy. We are thrilled that
Francesca Tiritiello joined the Board as a Non-Executive Director.
She has brought a wealth of experience with European restaurant
franchising to help the Group achieve this. Following our success
with UK franchising, we are excited about the opportunity to
utilise a similar low-capital approach and establish a greater
international presence.
Current Trading and Outlook
Looking forward, the Board is excited about the opportunity
ahead. Current trading remains in line with expectations, with like
for like (LFL) sales growth for the eight weeks to 26 February 2023
up 4 percent on FY22 (11 percent when adjusted for VAT).
The last few years have been punctuated by exceptional events
that continue to test us, our industry and the wider UK economy in
every area. Whilst Covid-19 gave us opportunities, the cost
implications for us over the last 12 months clearly created
challenges that inevitably had an impact on profitability. We see
these issues as relatively short term in nature, although we expect
that costs will remain at a higher level than before the Ukraine
conflict over the longer term. We have a flexible pricing strategy
and remain confident that we offer excellent value for money to our
customers, but clearly a greater semblance of certainty and
normality will help in all aspects of our business and the wider
sector alike. There has been action taken by management across
supply chain to manage costs and aid profitability, including
hedging utilities (April-September 2023), providing certainty for
the majority of FY23.
Tortilla is an incredibly resilient business, as we have shown
over a number of years. The continued growth in popularity of
Mexican cuisine and related consumer trends towards healthier
eating, customisable options and convenience have supported our
consistent growth. Our recent successes in Derby, Leicester and
Coventry and other cities show that the brand can operate across
different communities, geographies and demographics. We have a
healthy pipeline of further openings planned for later in the year
including in Milton Keynes and Bracknell; and are ahead of progress
on our IPO 2021 target of 45 new sites in five years.
We will continue to push to develop and grow the brand through
new site openings, partnerships, the implementation of new
technology and our increased presence in all aspects of social
media. Our Tik Tok posts are legendary!
Messaging remains buoyant from us all. This business will
succeed whatever is thrown at it and we look forward to continuing
this journey in 2023 and beyond.
Richard Morris
CHIEF EXECUTIVE OFFICER
27 MARCH 2023
KEY STRENGTHS
Through continuous innovation, we work hard to maintain high
standards in all aspects of business. Over the past few years, the
following elements have proven areas of particular strength.
Our products
Tortilla has developed a great reputation for its freshly
prepared, customisable, value-for-money product range of burritos,
tacos and salads. This has enabled us to appeal to a wide
demographic, maintaining our loyal customer base and generating
further customers as we grow. Our defining characteristics also
align with forecasted consumer trends and preferences, providing a
positive outlook for the future.
By offering great value-for-money, we have successfully expanded
operations across the UK, and are able to charge a minor delivery
premium (to address delivery commission costs) while remaining
highly competitive.
Embracing sector trends
The Tortilla Group observes and embraces key consumer trends,
flexing our products, services and formats to capitalise on growing
demand and maintain relevance in a rapidly changing market. Our
offering thus adheres to the dominant demands driving our sector,
which include:
-- Healthy eating - packed with rice, beans, vegetables and
plant-based options, our menu suits those seeking healthy
fast-casual food
-- Fresh and high provenance - our freshly prepared food is from
high quality, responsible sources communicated with full
transparency to the consumer
-- Convenience - Tortilla food is available in-store, via
takeaway or delivery, ensuring maximum options for optimum
convenience, and reaching more customers than ever before via our
widespread delivery-only kitchens
-- Customisation - a wide range of options enable customers to
tailor their Tortilla meal to their preferences and dietary
requirements
-- Ethnic food - Tortilla's authentic Mexican style food caters
to consumers' growing interest in ethnic food
Flexible business model
Much of the Group's success, during the pandemic and beyond, can
be attributed to our ability to adapt, flexing our business model
quickly and effectively to suit circumstances and locations.
Our flexibility is driven by three key factors of our business
model:
-- Trading strength over eat-in, takeaway and delivery channels
-- Ability to trade in small units and without extraction
-- Value-for-money offering that appeals to diverse customers
including students, local residents and office workers
In contrast to similar fast-casual restaurant businesses,
Tortilla has achieved significant geographical spread throughout
the UK - in terms of both presence and sales. Over half of our
estate and twelve of our top twenty selling stores are located
outside of London, covering a wide range of sites including
shopping centres, high streets, residential areas, delivery-only
kitchens and transport hubs. We are adept at scouting and
identifying the best format for new locations.
Moreover, our scalable central infrastructure, currently a 5,500
square foot Central Production Unit ("CPU") in Tottenham Hale,
provides cost advantages over our direct competitors, the
flexibility to increase its size in tandem with our growth strategy
and the assurance that product quality remains consistent across
all sites.
Marketing strategy
Through our clearly defined multi-channel marketing strategy,
the Group has built and maintained a loyal and diverse customer
base.
Our national campaigns run throughout the year with special
promotions for seasonal products and recipes across print, online
and social media, alongside targeted regional marketing for new
site launches.
With a large proportion of customers in the younger age
demographic (aged 16-34), we achieve significant engagement via
social media and our vast influencer network drives widespread
engagement across the most popular social media platforms, sharing
bite-size videos reaching millions of views.
Strong leadership
Tortilla's senior Management team continues to excel in its
ability to deliver strong and sustainable growth. Under the
stewardship of an experienced Board of Directors, our team has
continued to execute Tortilla's growth strategy effectively, taking
full advantages of opportunities as they arose and conducting all
activity with kindness, integrity and ownership.
We focus on hiring the best people at all levels and work hard
to propagate our strong culture and values throughout the
organisation.
Our Board and senior Management team regularly visit stores and
speak with teams and guests to ensure a strong connection between
corporate objectives and on-the-ground practice.
Cost effective hiring model
The simplicity of Tortilla food means that recipes and methods
are straightforward, and managers can train those with limited
experience to high levels of competency within a short time period.
We can therefore focus on hiring those with the values and
behaviour we seek, enabling us to maintain our culture and avoid
the negative impact of the UK's chef shortage.
This also helps us to hire from within our stores' local
communities, reducing travel time and cost for employees. All
stores strive to get to know their customers on first name terms as
part of the 'Raving Fans' initiative, and by creating this
'independent' feel to each restaurant, we gain a further
competitive advantage.
Property portfolio and strategy
At the end of 2022, the Group had 82 sites worldwide: 62 UK
sites we operate ourselves (59 Tortilla, three Chilango), four UK
sites franchised to SSP Group, five UK sites franchised to Compass
Group and eight franchised sites in the Middle East. The Group's
property portfolio is entirely leasehold.
Within the UK, the Group's portfolio of sites is well
diversified with respect to locations, with 34 sites within the M25
area and 28 sites outside of it. Five of Tortilla's top ten stores
(by profit) are located outside of the M25. As customers of
fast-casual operators tend to be primarily impulsive purchasers (65
percent of our customers visit on impulse), sourcing locations with
high footfall is a critical part of boosting brand awareness and
generating sales.
Tortilla's property portfolio
The Group's success is driven by our proven property strategy
with flexibility across site locations and formats. We generally
target locations ranging from 60 square metres to 200 square
metres, with the exception of our delivery-only kitchen sites,
which operate in typically 25-35 square metre sites. The estimated
capital expenditure per site (excluding delivery-only kitchens)
ranges from GBP375,000 to GBP475,000 (excluding landlord
contribution) depending on the size of the unit, site condition and
store front requirements.
The Group aims for a 30 percent minimum target investment hurdle
for its return on capital employed. Our sites are primarily located
in high street areas, residential locations, shopping centres and
transport hubs as these high footfall locations provide seven-day
trade with lunch and dinner availability, helping the brand appeal
to a wider range of consumers and trade throughout the day.
New sites
New sites have historically been a core driver of Tortilla's
development. Tortilla opened eight sites in 2014, and five/six
sites per year in 2015, 2016 and 2019, but slowed this rollout in
2017 and 2018 as rents did not provide the necessary value at that
time. Understandably, site openings slowed in 2020 but we
accelerated our pipeline by opening seven sites in FY21 (four
bricks and mortar and three delivery kitchens) along with two new
SSP Group franchise units. FY22 was a record year for growth with a
total of 18 additions to the estate.
New sites will continue to play a key role in our targeted
growth trajectory. Tortilla has a specialised property team that
supports our growth with a rigorous new site process including site
selection, assessment, contract negotiation and fitting. By opening
new sites on a regular basis, we have a well-established, reliable
infrastructure in place to manage the roll-out as required. We also
have a dedicated operations team that relocates to new sites to
ensure that new staff are adequately trained and are supervised
appropriately before they manage the site themselves.
As the number of sites within the Group's portfolio increases,
Tortilla will benefit from an expanding base of senior employees
familiar with these processes, and a larger regional Management
infrastructure to support new site openings. During 2022, we have
been working closely with CACI who have confirmed there are in
excess of 200 locations throughout the UK which meet the specific
criteria of Tortilla.
CHIEF FINANCIAL OFFICER'S REVIEW
Group financial KPI summary
2022 2021 Change
Revenue GBP57.7m GBP48.1m + 20.0%
========== ========= ===========
Gross profit margin 76.4% 79.6% - 3.2% pts
========== ========= ===========
Administrative expenses GBP43.6m GBP36.5m + 19.3%
========== ========= ===========
Net (loss)/profit after tax (GBP0.6m) GBP1.4m - 147.0%
========== ========= ===========
Cash generated from operations GBP7.6m GBP11.7m - 35.0%
========== ========= ===========
Alternative performance measures
("APMs")
========== ========= ===========
LFL revenue growth (vs 2019)(1) 16.4% 23.8% - 7.4% pts
========== ========= ===========
Adjusted EBITDA (pre-IFRS 16)(2) GBP4.0m GBP8.7m - 54.6%
========== ========= ===========
Net cash/(debt) (pre-IFRS-16)(3) (GBP0.6m) GBP6.7m - 108.2%
========== ========= ===========
(1) defined as the percentage change in like-for-like sales
compared to 2019 and so it excludes periods of non-trading
(2) defined as statutory operating profit before interest, tax,
depreciation and amortisation (before application of IFRS 16 and
excluding exceptional costs) and reflects the underlying trade of
the Group. The reconciliation to profit from operations is set out
below in this section of the report.
(3) defined as cash and cash equivalents less gross debt.
Calculated on a pre-IFRS 16 basis and so does not include lease
liabilities.
Revenue
Revenue increased by 20 percent to GBP57.7m, compared to
GBP48.1m in FY21. This was attributable to the following
factors:
-- An underlying 16.4 percent like-for-like revenue growth across the estate;
-- The strategic acquisition of Chilango Ltd, adding a further
eight sites across the estate and revenue of GBP3.3m; and
-- The addition of ten new company-owned sites in FY22
(+GBP3.2m), as well as the annualisation of the FY21 openings
(+GBP1.2m).
The above factors are partially offset by a GBP3.9m decrease
resulting from the removal of the reduced rate of VAT which
benefitted the Group in FY21.
Gross profit margin
The Group achieved a gross profit margin in FY22 of 76.4 percent
(FY21: 79.6 percent).
To support the hospitality industry in FY21, following the
lifting of the Covid-19 lockdown, the Government temporarily
applied a reduced VAT rate of 5 percent to certain suppliers. This
was in place from Q1 FY21 to Q3 FY21 and was lifted to 12.5 percent
in Q4. From Q2 FY22, the VAT rate returned to 20 percent.
Consequently, FY22 benefitted less than FY21, by GBP3.9m, which
equates to a 1.9 ppts reduction in gross profit margin.
The war in Ukraine, combined with the legacy of the pandemic,
led to unprecedented levels of inflation in FY22. We saw a c.30
percent increase in protein costs, which accounted for
approximately one-third of our cost of goods sold. This was the
main contributor to the remaining 1.3 ppts decrease in gross profit
margin.
Administrative expenses
Administrative costs increased by 19.3 percent year-on-year to
GBP43.6m. This was largely attributable to the increased level of
trade in FY22, as the restaurants were closed for a period in FY21
due to the pandemic. As a percentage of revenue, administrative
expenses remained consistent year-on-year at 75.5 percent (FY21:
75.9 percent).
Administrative expenses also incorporate exceptional items,
which decreased to GBP0.5m in FY22 (FY21: GBP1.8m). The GBP1.3m
decrease was attributable to costs incurred for the Group's IPO in
FY21. Of the GBP0.5m in FY22, GBP0.4m is related to the Chilango
Ltd acquisition.
Adjusted EBITDA (pre-IFRS 16)
The Group utilises Adjusted EBITDA (pre-IFRS 16) as the primary
assessment metric of profitability. A reconciliation of this
measure compared to profit from operations is below.
52 weeks 52 weeks
ended ended
1 January 2 January
2023 2022
GBP GBP
Profit from operations 536,129 3,634,155
Pre-opening costs 813,154 126,753
Share option expense 362,028 90,507
Depreciation and amortisation 6,212,778 6,255,038
Reversal of impairment (208,023) -
Exceptional items 542,140 1,856,268
Non-trading costs 18,538 244,639
IFRS 16 adjustment (4,304,273) (3,466,784)
Adjusted EBITDA (pre-IFRS 16) 3,972,471 8,740,576
------------ ------------
The Group generated GBP4.0m of Adjusted EBITDA (pre-IFRS 16) in
FY22, a reduction of GBP4.7m compared to FY21. This decrease was
most notably driven by the GBP4.8m VAT benefit that was received in
FY21.
Whilst the ongoing challenges of inflation impacted our Adjusted
EBITDA for FY22, we remain confident that our competitive price
point and customisable offering put us in a strong position to
continue to grow and succeed going forward.
Cash flow
Cash generated from operations decreased in line with the
reduction in Adjusted EBITDA, save for the settlement of a number
of FY21 working capital related cash flows (namely leasehold
payments) that were deferred to early FY22.
Cash expenditure on property, plant and equipment increased due
to the addition of more new sites in FY22 compared to FY21 and
higher maintenance capital costs arising from numerous
refurbishments when the Group converted five Chilango sites to
Tortilla branding.
The acquisition of Chilango Ltd resulted in an initial cash
outflow of GBP2.5m against a total consideration of GBP2.75m. The
remaining GBP0.25m of consideration is contingent and will be paid
upon achieving certain conditions. The GBP2.5m initial cash outflow
included GBP1.0m which was paid to Chilango Ltd for working capital
needs.
Financing and net debt
The Group had cash balances of GBP2.4m on 1 January 2023 which
translated to a net debt position of GBP0.6m (FY21: net cash of
GBP6.7m).
The Group's GBP10.0m revolving credit facility (RCF) is held
with Santander UK plc and comprises a drawn balance of GBP3.0m at 1
January 2023 with a further GBP7.0m of undrawn facility available
to the Group.
The financing facility attracts interest at a rate of 2.75
percent above SONIA on drawn balance, subject to an upward-only
ratchet based on increased net leverage levels, and is secured
until 14 September 2026.
Share based payments
Share-based payment expenses of GBP0.4m were recognised in FY22
(FY21: GBP0.1m) relating to the Group's Long Term Incentive Plan
("LTIP") created as part of the Group's admission to AIM.
Dividend
The Board did not recommend a dividend for FY22. As previously
announced, the Group's capital will be focused on growth over the
coming years with the dividend policy subject to re-assessment
going forward.
Going concern
In assessing the going concern position of the Group for the
consolidated financial statements for the year ending 1 January
2023, the Directors have considered the Group's cash flow,
liquidity and business activities.
During FY22 the Group did not draw down any further on the debt
facilities meaning it has access to a further GBP7.0m of financing
and this remained undrawn on 1 January 2023. The Group had cash
balances of GBP2.3m on 1 January 2023 which translated to a net
debt position of GBP0.6m.
The Group has prepared forecasts for the next twelve months,
including a base case and a severe downside case. Refer to note 2.6
of the financial statements for details of the assumptions and
methodology applied.
Upon consideration of this analysis and the principal risks
faced by the Group, the Directors are satisfied that the Group has
adequate resources to continue in operation for the foreseeable
future, a period of at least twelve months from the date of this
report. Accordingly, the Directors have concluded that it is
appropriate to prepare these financial statements on a going
concern basis.
Andy Naylor
CHIEF FINANCIAL OFFICER
27 MARCH 2023
FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
For the 52 weeks ended 1 January 2023
52 weeks ended 52 weeks
1 January ended
2023 2 January
2022
Note GBP GBP
Revenue 4 57,698,487 48,075,399
Cost of sales (13,605,825) (9,797,235)
-------------- ------------
Gross profit 44,092,662 38,278,164
Administrative expenses (43,556,533) (36,521,815)
Other operating income 5 - 1,877,806
-------------- ------------
Operating profit 6 536,129 3,634,155
Finance income 10 1,384 613
Finance expense 11 (1,466,062) (1,372,504)
-------------- ------------
(Loss)/profit before taxation (928,549) 2,262,264
Tax on (loss)/profit 12 290,327 (900,690)
-------------- ------------
(Loss)/profit for the period and comprehensive
income attributable to equity holders
of the parent company (638,222) 1,361,574
============== ============
(Loss)/earnings per share for profit
attributable to the owners of the parent
during the period
Basic and diluted (pence) 13 (1.7) 3.5
============== ============
There were no items of recognised income or expense other than
as shown in the Consolidated statement of comprehensive income
above. All activities relate to continuing operations.
The accompanying notes within this announcement form an integral
part of these financial statements.
Consolidated statement of financial position
As at 1 January 2023
1 January 2 January
2023 2022
Note GBP GBP
Non-Current Asset
Intangible assets 15 2,632,205 -
Tangible assets 16 13,721,101 9,264,167
Right-of-use assets 31,035,358 24,939,614
------------ ------------
47,388,664 34,203,781
Current assets
Inventories 17 397,083 326,108
Trade and other receivables 18 2,193,877 1,888,702
Cash at bank and in hand 19 2,375,800 9,653,172
----------- -----------
4,966,760 11,867,982
Current liabilities
Trade and other payables (9,110,069) (6,729,865)
Corporation tax 12 - (900,690)
Lease liabilities (5,614,340) (5,830,987)
----------- -----------
Net current liabilities (9,757,649) (1,593,560)
------------ ------------
Total assets less current
liabilities 37,631,015 32,610,221
Non-current liabilities
Loans and borrowings 21 (2,930,481) (2,911,941)
Lease liabilities (31,109,551) (25,831,103)
------------ ------------
Net assets 3,590,983 3,867,177
============ ============
Equity attributable to equity
holders of the company
Called up share capital 22 386,640 386,640
Share premium account 23 4,433,250 4,433,250
Share based payment reserve 23 452,535 90,507
Merger reserve 23 4,793,170 4,793,170
Profit and loss account 23 (6,474,612) (5,836,390)
------------ ------------
Total equity 3,590,983 3,867,177
============ ============
The accompanying notes within this announcement form an integral
part of these Financial Statements.
The financial statements of Tortilla Mexican Grill plc
(registration number 13511888) were approved and authorised for
issue by the board and were signed on its behalf by:
Consolidated statement of changes in equity
For the 52 weeks ended 1 January 2023
Called Share Share-based Merger Profit Total equity
up share premium payment reserve and loss
capital account reserve account
GBP GBP GBP GBP GBP GBP
At 3 January
2021 359,016 - - 4,793,170 (7,197,964) (2,045,778)
Profit for the
period - - - - 1,361,574 1,361,574
Share-based payments - - 90,507 - - 90,507
Newly issued
equity shares 27,624 4,972,376 - - - 5,000,000
Cost of issue
of equity shares - (539,126) - - - (539,126)
---------- ---------- ------------ ---------- ------------ -------------
Balance as at
3 January 2022 386,640 4,433,250 90,507 4,793,170 (5,836,390) 3,867,177
Loss for the
period - - - - (638,222) (638,222)
Share-based payments - - 362,028 - - 362,028
Balance as at
1 January 2023 386,640 4,433,250 452,535 4,793,170 (6,474,612) 3,590,983
========== ========== ============ ========== ============ =============
The accompanying notes within this announcement form an integral
part of these Financial Statements.
Consolidated statement of cash flows
For the 52 weeks ended 1 January 2023
52 weeks 52 weeks
ended ended
1 January 2 January
2023 2022
GBP GBP
Cash flows from operating activities
(Loss)/profit for the financial period (638,222) 1,361,574
Adjustments for:
Amortisation of intangible assets 10,456 -
Depreciation of right-to-use asset 3,657,710 3,514,015
Depreciation of property, plant and equipment 2,501,433 2,634,304
Loss on disposal of tangible assets 17,780 6,852
Net finance expense 183,939 377,144
Taxation (credit)/charge (290,327) 900,690
Increase in inventories (19,178) (86,326)
Decrease in trade and other receivables 196,503 9,593
Increase in trade and other payables 762,249 1,820,161
Impairment of property, plant and equipment 160,930 -
Reversal of impairment of property, plant
and equipment (368,953) -
Impairment of right-to-use asset 380,673 99,868
Corporation tax paid (610,363) -
Share based payments 362,028 90,507
Finance cost on lease liabilities 1,280,739 994,747
----------- ------------
Net cash generated from operating activities 7,587,397 11,723,129
----------- ------------
Cash flows from investing activities
Purchase of tangible fixed assets (6,643,962) (2,793,181)
Interest received 1,384 613
Acquisitions, net of cash acquired (1,687,365) -
----------- ------------
Net cash from investing activities (8,329,943) (2,792,568)
----------- ------------
Cash flows from financing activities
Proceeds from issue of shares - 5,000,000
Cost of issue of shares - (539,126)
New secured loans - 2,907,306
Repayment of loans - (12,596,054)
Interest paid (181,759) (203,303)
Payments made in respect of lease liabilities (6,353,067) (3,932,971)
----------- ------------
Net cash used in financing activities (6,534,826) (9,364,148)
----------- ------------
Net (decrease) in cash and cash equivalents (7,277,372) (433,587)
Cash and cash equivalents at beginning
of period 9,653,172 10,086,759
----------- ------------
Cash and cash equivalents at the end
of period 2,375,800 9,653,172
=========== ============
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
1. General information
Tortilla Mexican Grill plc, the "Company" together with its
subsidiaries, "the Group", is a public limited company whose shares
are publicly traded on the Alternative Investment Market, "AIM",
and is incorporated and domiciled in the United Kingdom and
registered in England and Wales (registration number 13511888).
The registered address of Tortilla Mexican Grill plc and all
subsidiaries is 142-144 New Cavendish Street, London, W1W 6YF,
United Kingdom. A list of the Company's subsidiaries is presented
in note 22.
The Group's principal activity is the operation and management
of restaurants trading under the Tortilla and Chilango brands both
within the United Kingdom and the Middle East.
Judgements made by the directors in the application of these
accounting policies have been discussed in note 3.
2. Accounting policies
2.1 Statement of compliance
The consolidated financial statements have been prepared in
accordance with International Accounting Standards in conformity
with the requirements of the Companies Act 2006 and in accordance
with International Financial Reporting Standards as adopted by the
UK ("Adopted IFRS").
Tortilla Mexican Grill plc has taken advantage of the exemption
under section 408 of the Companies Act 2006 to not present its own
statement of comprehensive income. The loss for the single entity
Tortilla Mexican Grill plc for the 52 weeks ended 1 January 2023
was GBP206,060 (2 January 2022: GBP1,634,074).
2.2 Basis of preparation of financial statements
The consolidated financial information contained in this
document includes the consolidated statement of comprehensive
income, the consolidated statement of financial position, the
consolidated statement of changes in equity and the consolidated
statement of cash flows, and related notes for the companies which
comprise the Group.
The financial statements have been prepared on an accruals basis
and under the historical cost convention unless otherwise stated.
The financial statements are presented in GBP.
2.3 New standards, amendments and interpretations adopted
The Directors do not consider that there are any new standards
or amendments applicable for the 52 weeks ending 1 January 2023
that would have a material impact on the Group's accounting
treatment.
2.4 Standards issued but not yet effective
The following standards are applicable for financial years
beginning on/after 1 January 2023:
-- IFRS 17 - Insurance contracts
-- IAS 1 - Disclosure of accounting policies
-- IAS 8 - Definition of accounting estimates
-- IAS 12 - Deferred tax related to assets and liabilities
arising from a single transaction
The following standards are applicable for financial years
beginning on/after 1 January 2024:
-- IFRS 10 - Sale or contribution of assets between an investor
and its associate or joint venture
-- IFRS 16 - Lease liability in a sale and leaseback
-- IAS 1 - Classification of liabilities as current or
non-current
-- IAS 1 - Non-current liabilities with covenants
When applied, none of these amendments are expected to have a
material impact on the Group.
2.5 Basis of consolidation
The consolidated financial information incorporates the
financial statements of the Group and all of its subsidiary
undertakings. The financial statements of all Group companies are
adjusted, where necessary, to ensure the use of consistent
accounting policies. Where the Group has power, either directly or
indirectly, to govern the financial and operating policies of an
entity to obtain benefits from its activities, it is classified as
a subsidiary.
The statement of financial position as at 1 January 2023
incorporates the results of Tortilla Mexican Grill plc and its
subsidiaries for all periods, as set out in the basis of
preparation.
In the 52 weeks ended 1 January 2023 the Group acquired Chilango
Ltd. The results of Chilango Ltd and its subsidiaries have been
included in the consolidated financial information.
2.6 Going concern
In assessing the going concern position of the Group for the
consolidated financial statements for the 52 weeks ended 1 January
2023, the Directors have considered the Group's cash flow,
liquidity and business activities.
During 2022 the Group did not draw down any further on the debt
facilities meaning it has access to a further GBP7.0m of financing
and this remained undrawn on 1st January 2023. The Group had cash
balances of GBP2.4m on 1 January 2023 which translated to a net
debt position of GBP0.6m.
As part of their going concern assessment the Directors have
prepared forecasts for a minimum period of twelve months from the
date of approval of the financial statements. In addition, certain
adverse scenarios have been considered for the purposes of stress
and sensitivity testing. In these adverse scenarios, the Group
would have sufficient liquidity to remain in compliance with its
covenant obligations.
A downside case was considered whereby sales are reduced by 5%
for the eighteen month period to June 2024. In this scenario the
Group has sufficient liquidity to remain in compliance with its
covenant obligations.
A severe downside case was considered to determine what adverse
conditions would result in a covenant breach. It was determined
that a 10% reduction in sales would cause an initial covenant
breach in June 2023, however this is before applying the effect of
mitigating actions such as reducing labour spend and controllable
costs. This severe case was modeled to provide comfort over the
Group's headroom on its covenants, and is not considered to be a
realistic scenario.
Upon consideration of this analysis and the principal risks
faced by the Group, the Directors are satisfied that the Group has
adequate resources to continue in operation for the foreseeable
future, a period of at least twelve months from the date of this
report. Accordingly, the Directors have concluded that it is
appropriate to prepare these financial statements on a going
concern basis.
2.7 Revenue
Revenue represents the amount receivable from customers for
goods and services, exclusive of VAT and discounts.
The Group has recognised revenue in accordance with IFRS 15. The
standard requires revenue to be recognised when goods or services
are transferred to customers and the entity has satisfied its
performance obligations under the contract, and at an amount that
reflects the consideration to which an entity expects to be
entitled in exchange for those goods or services.
The Group's revenue comprises of:
-- Food and beverage sales at restaurants with one performance
obligation that is satisfied when control is transferred to the
customer at the point of sale, which is usually when payment is
received, and no contract assets or contract liabilities are
created. The Group also generates revenue with third-party delivery
partners, which is payable the week after the revenue was recorded.
Revenue comprises the fair value of the consideration received or
receivable for the sale of goods and provision of services in the
ordinary course of the Group's activities. Revenue is shown net of
sales/value added tax, returns and discounts; and
-- Franchise fees from the Group's role as franchisor in the UK
and Middle East. Revenue comprises ongoing royalties based on the
sales results of the franchisee and up-front initial site fees.
Royalty revenue is accrued in line with reported sales performance
once revenue can be reliably measured. Upfront initial site fees
are recognised on opening of the associated franchisee
restaurant.
The Group operates a loyalty scheme for customers which entitles
the customer to free products after a specified number of
purchases. IFRS 15 requires entities to recognise a liability for
the provision of these products as the customer, in effect, pays
the Group in advance for future goods. The Group has not recognised
this liability as the value is not considered material.
2.8 Employee benefits
Short-term benefits
Salaries, wages, paid annual leave and sick leave, bonuses and
non-monetary benefits are accrued in the period in which the
associated services are provided by employees of the Group.
Defined contribution plan
Contributions to defined contribution schemes are charged to the
consolidated statement of comprehensive income in the year to which
they relate.
2.9 Share-based payments
A transaction is accounted for as a share-based payment where
the Group receives services from employees and Directors and pays
for these in shares or similar equity instruments.
The Group makes equity-settles share-based payments to certain
employees and Directors. Equity-settled share-based schemes are
measured at fair value (excluding the effect of non-market-based
vesting conditions) at the date of grant, measured by use of an
appropriate valuation model.
The fair value determined at the grant date of the
equity-settled share-based payment is recognised as an expense in
the statement of comprehensive income on a straight line basis over
the vesting period.
The vesting is dependent on achievement of specific performance
conditions for the 2023 and 2024 financial years. The share-based
payment expense will be modified if it is determined that these
performance conditions will not be met.
Share options are forfeited when an employee ceases to be
employed by the Group unless determined by the board to be a 'Good
Leaver'. A participant who ceases employment by reason of death,
injury, ill-health or disability is also deemed a good leaver.
2.10 Government grants
Coronavirus job retention scheme grants (CJRS) and other
government grants are recognised under the accruals model with any
deferred element included in liabilities as deferred income. Grants
of a revenue nature are recognised in the consolidated statement of
comprehensive income in the same period as the related expenditure.
There are no unfulfilled conditions attached to any grants
recognised in the period.
2.11 Current and deferred tax
Tax is recognised in profit or loss except that a charge
attributable to an item of income and expense recognised as other
comprehensive income or to an item recognised directly in equity is
also recognised in other comprehensive income directly in equity
respectively.
The current income tax charge is calculated on the basis of tax
rates and laws that have been enacted or substantively enacted by
the balance sheet date in the countries where the Group operates
and generates income.
Deferred tax balances are recognised where the carrying amount
of an asset or liability in the consolidated statement of financial
position differs from its tax base, except for differences arising
on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit;
and
-- investments in subsidiaries and jointly controlled entities
where the Group is able to control the timing of the reversal of
the difference and it is probable that the difference will not
reverse in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantially enacted by the
balance sheet date and are expected to apply when the deferred tax
liabilities or assets are settled or recovered. Deferred tax
balances are not discounted.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- the same taxable group company; or
-- different company entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
and liabilities are expected to be settled or recovered.
2.12 Alternative performance measures ("APMs")
The Group has identified certain measures that it believes will
assist the understanding of the performance of the business. These
APMs are not defined or specified under the requirements of IFRS.
The Group believes that these APMs, which are not considered to be
a substitute for, or superior to, IFRS measures, provide
stakeholders with additional useful information on the underlying
trends, performance and position of the Group and are consistent
with how business performance is measured internally.
The Group's APMs are: like for like ("LFL") revenue
growth/(decline), Adjusted EBITDA (Pre-IFRS), Operating cash flow
and net cash/(debt).
The Directors use Adjusted EBITDA as a primary KPI in managing
the business. This measure excludes exceptional items, share option
expenses and site pre-opening costs and applies pre-IFRS 16
treatment of leases. The Directors believe this measure gives a
more relevant indication of the underlying trading performance of
the Group and is also the measure used by the banks for the
purposes of assessing covenant compliance.
2.13 Intangible asset
Goodwill
Goodwill represents the difference between amounts paid on the
cost of a business combination and the acquirer's interest in the
fair value of the Group's share of its identifiable assets and
liabilities of the acquiree at the date of acquisition. Subsequent
to initial recognition, goodwill is measured at cost less
accumulated impairment losses. Goodwill is tested for impairment on
an annual basis.
Other intangible assets
Intangible assets are initially recognised at cost. After
recognition, under the cost model, intangible assets are measured
at cost less any accumulated amortisation and any accumulated
impairment losses. Amortisation is charged so as to allocate their
cost over their estimated useful life on a straight line basis.
Computer software assets have a finite useful life, which is
determined to be 3 years.
2.14 Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs.
Depreciation is charged so as to allocate the cost of assets
less their residual value over their estimated useful lives, using
the straight-line method.
Depreciation is provided on the following basis, which is
reviewed at each balance sheet date:
Short-term leasehold property - over the lease term
Plant and machinery - over 5 years
Fixtures and fittings - over 3 years
2.15 Leases
Right-of-use assets
The Group recognises a right-of-use asset at the lease
commencement date. Right-of-use assets are initially measured at
the same amount as the lease liability, reduced for any lease
incentive received. Subsequently, right-of-use assets are amortised
on a straight line basis over the remaining term of the lease and
are assessed for impairment at each balance sheet date. The
majority of leases are covered by the Landlord and Tenant Act 1985
which gives the right to extend the lease beyond the termination
date. The Group expects to extend the leases covered by the
Landlord and Tenant Act 1985. This extension period is not included
within the lease term as the termination date cannot be
determined.
Lease liabilities
At the commencement date of the lease, the Group recognises
lease liabilities measured at the present value of lease payments
to be made over the lease term. The lease payments include fixed
lease payments less any lease incentives receivable. In calculating
the present value of lease payments, the Group uses its incremental
borrowing rate at the lease commencement date because the interest
rate implicit in the lease is not readily determinable.
Subsequently, lease liabilities are increased to reflect the
interest cost on the liability and reduced for the lease payments
made, which are recognised on a straight-line basis over the term
of the lease. In addition, the carrying amount of lease liabilities
is remeasured if there is a modification, for example a rent review
or a change in the lease term.
When a lease liability is remeasured, the Group adjusts the
carrying amount of the liability to reflect the payments to be made
over the revised term, which are discounted at a revised discount
rate. An equivalent adjustment is made to the carrying value of the
right-of-use asset, with the revised carrying amount being
depreciated over the remaining (revised) lease term. Lease payments
which are variable in nature and are not linked to any index or
rate are expensed in the period to which they relate.
2.16 Impairment
Assets that are subject to depreciation or amortisation are
assessed at each balance sheet date to determine whether there is
any indication that the assets are impaired.
For the purposes of assessing impairment, assets are grouped at
the lowest levels for which there are separately identifiable cash
inflows which are largely independent of the cash inflows from
other assets or groups of assets (cash- generating units). Each
site is considered to be a CGU in its own right.
Goodwill arising on the acquisition of Chilango Ltd has been
allocated to individual cash-generating units based on the
forecasted EBITDA expected to be generated from each cash-generated
unit at the date of acquisition.
Other assets are tested for impairment whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset's (or CGU's) fair
value less costs to sell and value in use. Non-financial assets
that have been previously impaired are reviewed at each balance
sheet date to assess whether there is any indication that the
impairment losses recognised in prior periods may no longer exist
or may have decreased.
2.17 Inventories
Inventories are initially recognised at cost, and subsequently
at the lower of the cost and net realisable value. Cost comprises
all costs of purchase, costs of conversion and other costs incurred
in bringing the inventories to their present location and
condition.
Inventories are measured on a first-in-first-out basis.
2.18 Cash and cash equivalents
Cash is represented by cash in hand and deposits with financial
institutions repayable without penalty on notice of not more than
24 hours. Cash equivalents are highly liquid investments that
mature in no more than three months from the date of acquisition
and that are readily convertible to known amounts of cash with
insignificant risk of change in value. Payments taken from
customers on debit and credit cards are recognised as cash.
2.19 Valuation of investments
Investments in subsidiaries are measured at cost less
accumulated impairment. Income is recognised from these investments
only in relation to distributions receivable from post-acquisition
profits. Distributions received in excess of post-acquisition
profits are deducted from the cost of the investment.
2.20 Operating segments
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision-Maker
(CODM). The CODM has been identified as the management team
including the Chief Executive Officer, Chief Operating Officer and
Chief Financial Officer.
The Directors have taken a judgement that individual sites meet
the aggregation criteria in IFRS 8, constituting one operating and
one reporting segment and hence have concluded that the Group only
has a single reporting segment, as discussed in note 4.
2.21 Equity instruments
Financial instruments issued by the Group are treated as equity
only to the extent that they do not meet the definition of a
financial liability. The Group's ordinary shares are classified as
equity instruments.
2.22 Financial instruments
The Group does not trade in financial instruments and all such
instruments arise directly from operations.
Financial assets
Financial assets held at amortised cost are trade and other
receivables and cash. All trade and other receivables are initially
recognised at transaction value, as none contain in substance a
financing transaction.
Trade receivables are all due for settlement within one year.
Due to their short-term nature, the Directors consider the carrying
amount of trade and other receivables to equal their fair
value.
Fees paid on the establishment of loan facilities are recognised
as transactional costs of the loan and the fee is capitalised as a
prepayment for liquidity services and amortised straight line over
the period of the facility to which it relates.
Financial assets that are measured at cost and amortised cost
are assessed at the end of each reporting year for objective
evidence of impairment. The Group applies the IFRS 9 simplified
approach to measure expected credit losses using a lifetime
expected credit loss (ECL) provision for financial assets. To
measure expected credit losses on a collective basis, financial
assets are grouped based on similar credit risk and ageing. There
are no expected credit losses as consideration for goods is
received at the point of sale.
Interest income is recognised in the Statement of comprehensive
income and is included in the "finance income" line item.
Financial liabilities
Financial liabilities held at amortised cost include trade and
other payables, lease liabilities and borrowings. Trade and other
payables are initially recognised at transaction value as none
represent a financing transaction. They are only derecognised when
they are extinguished.
There are no material differences between the carrying values of
financial assets and liabilities held at amortised cost and their
fair values.
Financial assets and liabilities are offset and the net amount
reported in the consolidated statement of financial position when
there is an enforceable right to set off the recognised amounts and
there is an intention to settle on a net basis or to realise the
asset and settle the liability simultaneously.
Interest payable is recognised in the Statement of comprehensive
income and is included in the 'finance expenses' line item.
2.23 Financial risk
The Group's activities expose it to a variety of financial
instrument risks. The risk management policies employed by the
Group to manage these risks are detailed below. The primary
objectives of the financial instrument risk management function are
to establish risk limits and then ensure exposure to risks remains
within these limits.
Interest rate risk
The Group is exposed to interest rate risk as the Group's
borrowings have an interest rate of SONIA plus a margin.
Commodity price risk
The Group is exposed to movements in wholesale prices of food
and drinks. The Group sources the majority of its products in the
UK, however there is the risk of disruption to supply caused by
COVID-19 or Brexit. The Group always benchmarks any cost changes
and typically fixes prices for periods of between three and six
months.
Capital risk
The Group manages the capital structure to ensure it will be
able to operate as a going concern, whilst maximising the return to
shareholders. The Directors look to optimise the debt-to-equity
balance and may adjust the capital structure by paying dividends to
shareholders, returning capital to shareholders, issue new shares
or sell assets to reduce debt. The Directors intend to maintain low
net leverage levels as the Group's operating cash flows are
sufficient to fund the addition of new restaurants to the
portfolio.
Credit risk
The Group's credit risk is attributable to trade and other
receivables and cash with the carrying amount best representing the
maximum exposure to credit risk. The Group places its cash only
with banks with high-quality credit standings. Trade and other
receivables relate to day-to-day activities which are entered into
with creditworthy counterparties.
Liquidity risk
Liquidity risk is the risk that the Group may encounter
difficulties in meeting its financial obligations as they fall due.
They may arise from the Group's management of working capital,
finance charges and principal repayments on its debt.
The Directors regularly review cash flow forecasts to determine
whether the Group has sufficient reserves to meet obligations and
take advantage of opportunities.
Maturity analysis
Within 1 to 2 2 to 5 More than
1 year years years 5 years Total
GBP GBP GBP GBP GBP
----------- ---------- ----------- ----------- -----------
1 January 2023
Trade and other 8,644,982 - - - -
payables
Lease liabilities 5,614,340 5,147,757 12,129,224 13,832,570 36,723,891
Borrowings - - 2,933,481 - -
----------- ---------- ----------- ----------- -----------
14,259,322 5,147,757 15,062,705 13,832,570 36,723,891
----------- ---------- ----------- ----------- -----------
2 January 2022
Trade and other
payables 6,729,865 - - - 6,729,865
Lease liabilities 5,830,987 4,225,074 10,085,891 11,520,138 31,662,090
Borrowings - - 2,911,941 - 2,911,941
=========== ========== =========== =========== ===========
12,560,852 4,225,074 12,997,832 11,520,138 41,303,896
----------- ---------- ----------- ----------- -----------
3. Critical accounting estimates and judgements
The Group makes certain judgements, estimates and assumptions
regarding the future. Estimates and judgements are continually
evaluated based on historical experience and other factors,
including the expectations of future events that are believed to be
reasonable under the circumstances. The estimates and judgements
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities within the next
financial year are discussed below.
Determining the discount rate for IFRS 16
At the commencement date of property leases the lease liability
is calculated by discounting the lease payments. The discount rate
used should be the interest rate implicit in the lease. However, if
that rate cannot be readily determined, which is generally the case
for property leases, the lessee's incremental borrowing rate is
used. This being the rate that the individual lessee would have to
pay to borrow the funds necessary to obtain an asset of similar
value to the right-of-use asset in a similar economic environment
with similar terms, security and conditions.
The Directors carried out a review of the historic borrowing
rates of the Group and historic bond rates together with analysis
of the lease terms. They concluded that the use of a single
discount rate applied to all leases signed prior to 2 January 2022
is a reasonable approach. Based on this analysis a discount rate of
3.4 percent has been applied. Subsequently, discount rates have
been applied on a lease-by-lease basis for the 52 weeks to 1
January 2023, in order to reflect the increasing risk-free rate
during this period.
For the lease liabilities at 1 January 2023 a 0.1 percent
increase in the discount rate would reduce the total liabilities by
GBP83,000 (2 January 2022: GBP136,000), which is not considered to
be material.
Impairment of goodwill, right of use assets and property, plant
and equipment
Goodwill, right-of-use assets and property, plant and equipment
are reviewed for impairment when there is an indication that the
assets might be impaired by comparing the carrying value of the
assets with their recoverable amounts. The recoverable amount of an
asset or cash generating unit (CGU) is determined based on
value-in-use calculations prepared on the basis of the Directors'
estimates and assumptions. Individual sites are viewed as separate
CGUs.
The key assumptions in the value-in-use calculations include the
growth rates of revenue and expenses, together with the Group's
weighted average cost of capital (WACC), which is used as a
discount rate. Projected cash flows are based on financial budgets
approved by the Board covering a five year period. Beyond this five
year period, projected cash flows have been based on a 3.0% growth
rate until the end of the lease terms. The value-in-use
calculations also factor in the cost of maintaining the assets, set
at GBP19,000 per annum for each site based on historic averages,
and the impact of direct overhead costs.
For the leases held in Chilango Ltd, a further key assumption in
the value-in-use calculations was that the leases with terms ending
in less than five years would be able to be renewed with terms of
10-15 years, in line with the term lengths of leases held by
Mexican Grill Ltd.
An independent external consultancy was engaged to calculate the
Group's post-tax WACC. As at 1 January 2023, the pre-tax WACC was
determined to be 13.1% (2 January 2022: 14.3%). An increase in the
discount rate of 1.0 percent would increase the impairment charge
for the 52 weeks ended 1 January 2023 by GBP11,000, which is not
considered to be material.
In the 52 weeks ended 1 January 2023, property, plant and
equipment assets of GBP13,721,101 and right-of-use assets of
GBP31,035,358 and goodwill of GBP2,624,886 have been tested for
impairment. Detailed impairment testing resulted in the recognition
of an impairment charge of GBP160,930 (52 weeks ended 2 January
2022: GBPnil) and an impairment reversal of GBP368,953 (52 weeks
ended 2 January 2022: GBPnil) against property, plant and equipment
assets (note 16) and an impairment charge of GBP380,673 (52 weeks
ended 2 January 2022: GBP99,868) against right-of-use assets (note
14).
Useful economic lives of property, plant and equipment
The depreciation charge is dependent upon the assumptions used
regarding the useful economic lives of assets. A 10 percent
increase in average useful economic lives would result in a
GBP229,000 decrease in depreciation in the 52 weeks ended 1 January
2023 (2 January 2022: GBP239,000).
Share-based payments
The charge for share-based payments is calculated according to
the methodology described in note 8. The Black-Scholes model
requires subjective assumptions to be made including the volatility
of the Company's share price, fair value of the shares and the risk
free interest rates.
Business combinations
The acquisition of Chilango Ltd has been accounted for using the
acquisition method under IFRS 3. The identifiable assets and
liabilities are recognised at their fair value at the date of
acquisition. Determining the fair value of these assets and
liabilities involved a degree of estimation. In particular, the
goodwill held within Chilango Ltd was not determined to be
separately identifiable and so the fair value of this goodwill was
adjusted to GBPnil.
4. Revenue
52 weeks 52 weeks
ended ended
1 January 2 January
2023 2022
GBP GBP
Sale of goods 57,050,636 47,769,278
Franchise income 647,851 306,121
----------- -----------
57,698,487 48,075,399
----------- -----------
IFRS 8 Operating Segments requires operating segments to be
based on the Group's internal reporting to its Chief Operating
Decision Maker (CODM). The CODM is regarded as the management team
of the Chief Executive Officer, the Chief Financial Officer and the
Chief Operating Officer.
The Group has three segments:
-- UK sales from Group-operated restaurants
-- UK franchise sales from franchised restaurants
-- Middle East franchise sales from franchised restaurants
The franchise aspects of the business have a minimal cost and
asset base and therefore they are not considered to be material and
separable segments. There are similar economic characteristics
between the franchise aspects and the Group-operated restaurant
business, with each following a similar sales and EBITDA
trajectory. These have been reviewed by the Directors along with
the non-financial criteria of IFRS 8. It is the Directors'
judgement that despite some short-term variability, all segments
have similar economic characteristics in the medium and long-term
and meet the criteria for aggregation into a single reporting
segment. Therefore, no segmental analysis is provided.
5. Other operating income
52 weeks 52 weeks
ended ended
1 January 2 January
2023 2022
GBP GBP
CJRS income(1) - 491,825
Other government grants(2) - 1,385,981
- 1,877,806
------------- -----------
1 Coronavirus Job Retention scheme
2 Includes Retail Leisure Hospitality Grant, Local Restriction Support Grants and Restart Grants
6. Operating profit
The operating profit is stated after charging/(crediting):
52 weeks 52 weeks
ended ended
1 January 2 January
2023 2022
GBP GBP
Depreciation & amortisation 6,169,599 6,148,319
Impairment of ROU assets 380,673 99,868
Loss on disposal of fixed assets 17,780 6,852
Impairment of fixed assets 160,930 -
Reversal of impairment of fixed assets (368,953) -
Variable lease payments 969,880 615,613
Inventories - amounts charged as an expense 13,605,825 9,797,235
Share option expense 362,028 90,507
Pre-opening costs** 813,154 126,753
Exceptional items* 542,140 1,856,268
Bank arrangement fee amortisation 18,538 174,454
Auditors' remuneration:
Audit fees 120,000 77,000
Tax compliance services - 14,000
Other assurance services 14,000 95,000
=========== ===========
*Exceptional items in 2022 include GBP415,908 of costs incurred
in relation to the acquisition of Chilango Ltd.
52 weeks 52 weeks
ended ended
1 January 2 January
2023 2022
GBP GBP
Pre-opening costs 813,154 126,753
Number of sites openings in period 18 7
========== ==========
** The Group reports costs incurred prior to the opening of a
site as a separate expense and excludes these from the calculation
of Adjusted EBITDA (a non-GAAP measure). This approach is in line
with the standard industry practice and the methodology used by the
Group's bank for the purposes of assessing covenant compliance. The
Directors view this as a better way to analyse the underlying
performance of the Group since it excludes costs which are not
trading related.
7. Employees
The average monthly number of employees, including the
directors, during the period was as follows:
1 January 2 January
2023 2022
No. No .
Operations staff 1,093 749
Head office staff 51 36
--------- ---------
1,144 785
========= =========
The average monthly number of employees, including the
Directors, during the period was as follows:
1 January 2 January
2023 2022
GBP GBP
Wages and salaries 16,998,678 13,315,004
Social security costs 1,007,144 779,134
Pension costs 190,987 148,632
Share based payments (note 8) 362,028 90,507
----------- -----------
18,558,837 14,333,277
=========== ===========
Directors' remuneration, included in staff costs,
was as follows:
1 January 2 January
2023 2022
GBP GBP
Short-term employee benefits 511,677 718,900
Post-employment benefits 3,485 3,300
----------- -----------
515,162 722,200
=========== ===========
8. Director's remuneration and key management information
The highest paid director received remuneration of GBP370,000
(2022 - GBP406,200). The number of Directors receiving pension
contributions was 4 (2022: 4).
The share-based payment expense arising from the Directors'
participation in the Company's LTIP scheme was GBP240,984 (2022:
GBP60,246).
There are no Key Management Personnel other than the Directors.
Further information about the remuneration of individual Directors
is provided in the Remuneration report.
9. Share based payments
A transaction is accounted for as a share-based payment when
services are paid for in shares or similar equity instruments.
The Group issues equity-settled share-based payments to
Directors and certain members of staff. Equity-settled share-based
schemes are measured at fair value at the date of grant, using the
Black Scholes valuation model. The expected life used in the model
is adjusted, based on Management's best estimate, for the effects
of non-transferability, exercise restrictions and behavioural
considerations.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of
shares that will eventually vest.
The Tortilla Mexican Grill plc Long-Term Incentive Plan 2021
("LTIP")
Under the LTIP, options were awarded to Directors and members of
the senior management team. 50 percent vests after three years and
the remaining 50 percent vests after the fourth year. The vesting
is dependent on achievement of specific Adjusted EBITDA targets for
the 2023 and 2024 financial years. These performance conditions are
expected to be met.
In the 52 weeks ended 1 January 2023, 205,714 nil cost options
were awarded under the LTIP to Directors which will vest on 1
December 2024. The vesting is dependent on the Directors'
continuous employment.
Awards are forfeited if the employee leaves the Group before the
awards vest, except under circumstances where the employee is
considered a 'Good Leaver'.
Details of the share awards outstanding are as follows:
1 January 1 January 2 January 2 January
2023 2023 Weighted 2022 2022
Number of average exercise Number of Weighted
share options price share options average exercise
GBP price
# #
GBP
Outstanding at
beginning
of the period 1,809,393 1.8 - -
Granted during
the period
Exercised during
the
period Forfeited - 1,809,393 1.8
during 205,714 - - -
the period - (69,061) 1.8 - -
--------------------------- ----------------- -------------------------- -----------------
Outstanding at
the end
of the period 1,946,046 1.6 1,809,393 1.8
=========================== ================= ========================== =================
The awards outstanding at the end of 1 January 2023 have a
remaining weighted average contractual life of two years (2 January
2022: three years) and an exercise price of GBP1.62 (2 January
2022: GBP1.81). No awards were exercisable at the end of the period
(2 January 2022: none).
The Group recognised total expenses related to the above
equity-settled share-based payment transactions in the form of
options during the 52 weeks ended 1 January 2023 of GBP362,028 (2
January 2022: GBP90,507) and related employer National Insurance of
GBP9,988 (3 January 2021: GBPnil).
The fair values were calculated using a Black Scholes model. The
inputs used for fair valuing awards granted during the period was
as follows:
1 January 1 January
2023 2022
Share price at grant date (pence) 87p 181p
Exercise price (pence) - 181p
Expected volatility (%) 90% 43%
Option life (years) 2.0 5.0
Risk free interest rate (%) 3.57% 0.63%
========= =========
In the absence of any historical volatility data for Tortilla
Mexican Grill plc, the expected volatility was determined by
reviewing the volatility of the share price of similar entities
which are currently traded on AIM.
10. Interest receivable
52 weeks ended 52 weeks
1 January ended
2023 2 January
GBP 2022
GBP
Bank interest income 1,384 613
================ ==========
11. Interest payable and similar expenses
52 weeks ended 52 weeks
1 January ended
2023 2 January
GBP 2022
GBP
Bank interest payable 185,323 377,757
Finance cost on lease liabilities 1,280,739 994,747
---------------- ----------
1,466,062 1,372,504
================ ==========
12. Taxation
52 weeks ended 52 weeks
1 January ended
2023 2 January
GBP 2022
GBP
Current tax
Corporation tax on profits for the period - 900,690
Adjustments in respect of previous periods (290,327) -
---------------- ----------
Total current tax (290,327) 900,690
================ ==========
Factors affecting tax charge for the period
The tax assessed for the period differs from the standard rate
of corporation tax in the UK of 19%. The differences are explained
below:
52 weeks ended 52 weeks ended
1 January 2 January
2023 2022
GBP GBP
(Loss)/profit on ordinary activities before
tax (928,549) 2,262,264
===================== ===================
Profit on ordinary activities multiplied
by standard rate of corporation tax in the
UK of 19% (2021 - 19%) (176,424) 429,830
Effects of:
Expenses not deductible for tax purposes 109,211 344,578
Depreciation in excess of capital allowances (683,653) 319,969
Movement in tax losses 721,889 (202,473)
Other timing differences, primarily arising
from operating lease accounting 28,977 8,786
Adjustments to tax charge in respect of
prior periods (290,327) -
--------------------- -------------------
Total tax charge for the period (290,327) 900,690
===================== ===================
In the 53 weeks ended 3 January 2021, the Group had a brought
forward tax loss of GBP1,065,646, which was fully utilised in the
52 weeks ending 2 January 2022.
In March 2021 a change to the future corporation tax rate was
substantively enacted to increase from 19% to 25% from 1 April
2023. Accordingly, the rate used to calculate the deferred tax
balances at 1 January 2023 is 25% (2 January 2022: 25%) as the
timing of the release of this asset is materially expected to be
after this date.
No deferred tax has been provided for at either balance sheet
date presented on the basis the position is not material.
13. Earnings/(loss) per share
Basic earnings/(losses) per share is calculated by dividing the
profit/(loss) attributable to equity shareholders by the weighted
average number of shares outstanding during the period.
1 January 2 January
2023 2022
GBP GBP
(Loss)/profit used in calculating basic and
diluted profit (638,222) 1,361,574
Weighted average number of shares for the
purpose of basic and diluted earnings per
share 38,664,031 38,664,031
----------- -----------
Basic and diluted (loss)/earnings per share
(pence) (1.7) 3.5
=========== ===========
Due to the nature of the options granted under the long-term
incentive plan, they are considered to be contingently issuable
shares and therefore have no dilutive effect.
Leases
GBP
Right-of-use assets
At 3 January 2021 25,324,841
Additions 4,385,093
Depreciation (3,514,015)
Impairment (99,868)
Disposals (1,156,437)
------------
At 2 January 2022 24,939,614
Additions 8,459,288
Disposals (996,353)
Impairment (380,673)
Arising on acquisition 2,671,192
Depreciation (3,657,710)
------------
At 1 January 2023 31,035,358
============
GBP
Lease liabilities
At 3 January 2021 (31,371,659)
Additions (4,385,093)
Interest expense (994,747)
Lease payments 3,932,971
Disposals 1,156,438
--------------
At 2 January 2022 (31,662,090)
Additions (8,459,288)
Arising on acquisition (2,671,192)
Interest expense (1,280,739)
Lease payments 6,353,067
Disposals 996,353
--------------
At 1 January 2023 (36,723,889)
==============
Carrying amount by maturity of the Group lease liabilities
Within 1 1 to 2 years 2 to 5 years Over 5 years More than Total
year 1 year
GBP GBP GBP GBP GBP GBP
1 Jan 2023 5,614,340 5,147,757 12,129,224 13,832,570 31,109,551 36,723,891
2 Jan 2022 5,830,987 4,225,074 10,085,891 11,520,138 25,831,103 31,662,090
========= ============ ============ ============ ========== ==========
15. Intangible assets
Computer Goodwill Total
software
GBP GBP GBP
Cost
Arising on acquisition 24,600 2,624,886 2,649,486
Disposals (9,100) - (9,100)
--------- ----------- -----------
At 1 January 2023 15,500 2,624,886 2,640,386
--------- ----------- -----------
Amortisation
Amortisation charge 10,456 - 10,456
On disposals (2,275) - (2,275)
--------- ----------- -----------
At 1 January 2023 8,181 - 8,181
--------- ----------- -----------
Net book value
At 1 January 2023 7,319 2,624,886 2,632,205
========= =========== ===========
At 2 January 2022 - - -
========= =========== ===========
Goodwill
In the 52 weeks ended 1 January 2023 goodwill of GBP2,624,886
was recognised on acquisition of Chilango Ltd. Each site is
considered to be a separate CGU for impairment purposes and
therefore the goodwill was allocated to individual sites. The
goodwill allocation was based on the forecasted EBITDA that was
expected to be generated from each site at the time of
acquisition:
Goodwill
GBP
Brewer Street 334,647
Brushfield Street 171,507
Chancery Lane 117,126
Croydon 104,577
Islington 466,414
London Bridge 543,801
London Wall 363,928
Manchester 522,886
---------
2,624,886
=========
16. Tangible fixed assets
Long-term
leasehold Plant Fixtures
property and machinery and Total
GBP GBP fittings GBP
GBP
Cost
At 3 January 2022 14,295,429 3,621,556 3,671,580 21,588,565
Additions 2,076,864 1,578,180 2,988,918 6,643,962
Arising from acquisition 104,019 43,047 194,143 341,209
Disposals (427,046) (114,138) (162,234) (703,418)
------------ --------------- ----------- ------------
At 1 January 2023 16,049,266 5,128,645 6,692,407 27,870,318
------------ --------------- ----------- ------------
Depreciation
At 3 January 2022 7,536,464 2,777,463 2,010,471 12,324,398
Charge for the period 1,222,230 548,409 730,794 2,501,433
Arising from acquisition 37,176 24,089 171,321 232,586
Disposals (518,938) (79,971) (102,268) (701,177)
Impairment charge 160,930 - - 160,930
Impairment losses written
back (368,953) - - (368,953)
------------ --------------- ----------- ------------
At 1 January 2023 8,068,909 3,269,990 2,810,318 14,149,217
------------ --------------- ----------- ------------
Net book value
At 1 January 2023 7,980,357 1,858,655 3,882,089 13,721,101
============ =============== =========== ============
At 2 January 2022 6,758,965 844,093 1,661,109 9,264,167
============ =============== =========== ============
17. Inventories
1 January 2 January
2023 2022
GBP GBP
Food and beverage for resale 397,083 326,108
========= =========
There is no material difference between the replacement cost of
inventories and the amounts stated above.
Total inventory recognised as an expense in the consolidated
statement of comprehensive income during the period was
GBP13,605,825 (52 weeks ended 2 January 2022: GBP9,797,235).
18. Trade and other receivables
1 January 2 January
2023 2022
GBP GBP
Trade receivables 573,832 298,334
Other receivables 1,129,420 735,324
Prepayments and accrued income 490,625 855,044
--------- ---------
2,193,877 1,888,702
========= =========
Trade receivables primarily relate to sales due from third party
delivery providers and these are settled the week immediately
following the week in which the sale was recorded. There are also
amounts owed by the Group's franchise partners, which are due
within 30 days of the end of the period.
Other receivables consists of deposits held by third parties,
generally landlords, and amounts accrued but not yet invoiced to
third parties. These amounts not invoiced are franchise income and
produce from the Group's central kitchen which is sold and bought
back to the Group's main food supplier, who provides the
distribution across the Group's estate.
The Group held no collateral against these receivables at the
balance sheet dates. The Directors consider that the carrying
amount of receivables are recoverable in full and that any expected
credit losses are immaterial.
19. Cash and cash equivalents
1 January 2 January
2023 2022
GBP GBP
Cash at bank and in hand 2,375,800 9,653,172
========= =========
Cash and cash equivalents comprise cash at bank, in hand and
cash in transit. Cash in transit comprises card payment receipts,
which are received on the next working day. The fair value of cash
and cash equivalents is the same as their carrying value.
20. Trade and other payables
1 January 2 January
2023 2022
GBP GBP
Trade payables 2,496,200 2,331,636
Corporation tax - 900,690
Other taxation and social security 2,265,394 508,850
Other payables 864,184 456,830
Accruals and deferred income 3,484,291 3,432,549
--------- ---------
9,110,069 7,630,555
========= =========
21. Loans and Borrowings
1 January 2 January
2023 2022
GBP GBP
Bank loans - falling due after one year 3,000,000 3,000,000
Amortised issue costs (69,519) (88,059)
----------- -----------
2,930,481 2,911,941
=========== ===========
As part of the Group's IPO on 8 October 2021, the existing
facilities were repaid and a new financing arrangement was signed
with Santander UK plc. This is a GBP10m senior facility, repayable
in full on 14 September 2026, with a drawn balance at 1 January
2023 of GBP3.0m (2 January 2022: GBP3.0m). The Group has allocated
GBP2.5m of the remaining undrawn amount to an ancillary facility,
an overdraft, which was not utilised at 1 January 2023 or 2 January
2022. Arrangement fees of GBP93,000 were incurred as part of the
refinancing and this is being amortised to the Group consolidated
statement of comprehensive income over the term of the facility.
The loan balance is being recognised net of these arrangement
fees.
The facility accrues interest at rates of 2.75% - 3.25% plus
SONIA and the overdraft attracts interest at a rate of 2.75% plus
SONIA when utilised. These loans are secured by a debenture over
the assets of the Group and are presented net of capitalised
amortised issue costs.
22. Share capital
1 January 2 January
2023 2022
GBP GBP
Allotted, called up and fully paid
38,664,031 Ordinary shares of GBP0.01 each 386,640 386,640
========= =========
Ordinary shares entitle the holder to participate in dividends
and the process on the winding up of the Company in proportion to
the number of and amounts paid on the shares held. The fully paid
ordinary shares have a par value of GBP0.01 and the Company does
not have a limited amount of authorised capital.
23. Reserves
Share premium account
The share premium account records the amount above the nominal
value received for shares sold.
Share based payment reserve
The Group presents employee share options as an adjustment to
own equity through this reserve until the point that the shares are
awarded and cease to be conditional awards.
Merger Reserve
The merger reserve represents the excess over nominal value of
the fair value consideration for the business combination of
Tortilla Mexican Grill plc and Mexican Grill Ltd during the Group's
IPO. This was satisfied by the issue of shares in accordance with
Section 612 of the Companies Act 2006.
Profit and loss account
The accumulated net profits and losses of the Group.
24. Analysis of net debt
At 3 January Cash flows Acquisition Additions Finance At 1 January
2022 of subsidiaries and disposals expense 2023
GBP of
GBP GBP leases GBP GBP
GBP
Cash at bank and
in hand 9,653,172 (7,277,372) - - - 2,375,800
Bank loans (2,911,941) - - - (18,540) (2,930,481)
Lease liabilities (31,662,090) 6,353,067 (2,671,192) (7,462,935) (1,280,739) (36,723,889)
-------------- ----------- ---------------- -------------- ------------- --------------
Net debt (24,920,859) (924,305) (2,671,192) (7,462,935) (1,299,279) (37,278,570)
============== =========== ================ ============== ============= ==============
25. Business combinations
On 23 May 2022, the Company acquired 100% of the issued share
capital and voting rights of Chilango Ltd from RDCP Group Limited.
Chilango Ltd operates a chain of fast-casual Mexican restaurants,
primarily in London. The purpose of the acquisition was the grow
the Group's business by accessing key central London locations.
Recognised amounts of identifiable assets acquired and
liabilities assumed
Fair value
Book value adjustments Fair value
GBP GBP GBP
Fixed Assets
Tangible 2,810,932 - 2,810,932
Intangible 821,576 (804,417) 17,159
------------- ------------ -------------
Current Assets 3,632,508 (804,417) 2,828,091
Inventories 51,797 - 51,797
Trade and other receivables 778,208 - 778,208
Cash at bank and in hand 75,403 - 75,403
------------- ------------ -------------
Total Assets
Liabilities 4,537,916 (804,417) 3,733,499
Due within one year (1,894,486) (30,510) (1,924,996)
Due after more than one year (1,410,390) - (1,410,390)
Lease liabilities (2,672,467) - (2,672,467)
------------- ------------ -------------
Total Identifiable net liabilities (1,439,427) (834,927) (2,274,354)
============= ============ =============
Goodwill 2,624,886
-------------
Total purchase consideration 350,532
=============
Fair value of consideration paid:
GBP
Cash 100,532
Contingent consideration 250,000
Total purchase consideration
350,532
---------
At acquisition date, Chilango Ltd reported goodwill of
GBP804,417 within intangible assets. This was not considered to be
separately identifiable and therefore a fair value adjustment was
made in respect of this.
The lease liabilities of GBP2,672,467 were calculated on
acquisition in line with IFRS 3. These were calculated as if the
lease inception date was the acquisition date.
On acquisition, the Company made an initial cash outflow of
GBP2.5m. The acquisition was made on a "cash free, debt free" basis
and therefore further amounts of GBP1,432,760 were paid to RDCP
Group Limited in addition to the consideration shown above. The
Company paid an amount of GBP966,708 to Chilango Ltd on acquisition
for working capital needs. The contingent consideration of
GBP250,000 remains unpaid at reporting date and is included within
other payables (note 20).
On acquisition, Chilango Ltd held trade and other receivables
with a carrying and fair value of GBP669,708 representing
contractual receivables of GBP669,708. The Group therefore expects
to collect all contractual receivables.
Goodwill arising on acquisition of GBP2,624,886 differs from the
amount reported in the Interim Results of Tortilla Mexican Grill
plc for the 26 weeks ended 3 July 2022 due to a fair value
adjustment of GBP30,510 to Chilango Ltd's to liabilities falling
due within one year, as stated above.
The goodwill arising on the Chilango Ltd acquisition is not
deductible for tax purposes. The results of Chilango Ltd since
acquisition are as follows:
Current
period since
acquisition
GBP
Turnover 2,602,587
Loss for the period since acquisition (1,133,336)
===============
Had the acquisition occurred on 3 January 2022, the contribution
of Chilango Ltd to the Group's revenue would have been GBP5,825,447
and the contribution to the Group's profit would have been
GBP(1,703,390).
An amount GBP171,717 has been charged to the Statement of
comprehensive income the 52 weeks ended 1 January 2023 in respect
of acquisition costs for Chilango Ltd and is recognised with
administrative expenses.
26. Subsidiary undertakings
The subsidiaries of Tortilla Mexican Grill plc, all of which
have been included in the consolidated financial information and
comprise the Group, are as follows:
Name Registered Principal activity Holding
office
Mexican Grill Ltd United Kingdom Operation of restaurants 100%
Mexican Grill International
Franchise Ltd United Kingdom International franchising 100%
California Grill Ltd United Kingdom Holding leases 100%
Chilango Ltd United Kingdom Operation of restaurants 100%
Chilango City Ltd United Kingdom Holding leases 100%
Chilango London Ltd United Kingdom Holding leases 100%
Chilango Mexican Ltd United Kingdom Holding leases 100%
Chilango UK Ltd United Kingdom Holding leases 100%
The registered address for all above named subsidiaries is 1st
Floor Evelyn House, 142 New Cavendish Street, London, United
Kingdom, W1W 6YF.
The shares held in all above named subsidiaries are ordinary
shares.
27. Related party transactions
Mexican Grill Ltd was charged monitoring fees of GBP30,000 for
the 52 weeks ended 1 January 2023 (2 January 2022: GBP35,000) by QS
Direct SI 2 S.à.r.l, in its capacity as General Partner of the
Group's shareholder QS Direct SI 2 SCA SICAR.
Tortilla Mexican Grill plc was charged non-executive director
fees of GBP12,375 for the 52 weeks ended 1 January 2023 (2 January
2022: GBPnil) by Kikkirossi SARL, an entity incorporated in
Switzerland which is wholly owned by a Director of Tortilla Mexican
Grill plc.
28. Controlling party
The Directors believe that there is no ultimate controlling
party of the Group.
29. Capital commitments
The Group had capital commitments of GBPnil at 1 January 2023 (2
January 2022: GBP65,050).
30. Post-balance sheet events
The Directors consider that there are no material post balance
sheet effects affecting the Group or the Company that have occurred
between the end of the period and the date of publication of this
report.
31. IFRS comparison to UK GAAP (non-IFRS)
The Group applied IFRS for the first time in the 52-week period
ending 2 January 2022. The Group applied IFRS 16 using the modified
retrospective approach, with the date of initial application of 1
January 2018.
Pre-IFRS IFRS 16 IFRS Pre-IFRS IFRS 16 IFRS
16 16
52 weeks adjustments 52 weeks 52 weeks adjustments 52 weeks
ended 1 ended 1 ended 2 ended
Jan Jan Jan 2 Jan
2023 GBP 2023 2022 GBP 2022
GBP GBP GBP GBP
Revenue 57,698,487 - 57,698,487 48,075,399 - 48,075,399
Cost of sales (13,605,825) - (13,605,825) (9,797,235) - (9,797,235)
------------- ------------- ------------- ------------- ------------- -------------
Gross profit 44,092,662 - 44,092,662 38,278,164 - 38,278,164
Other operating
income - - - 1,877,806 - 1,877,806
Administrative
expenses (44,377,113) 820,580 (43,556,533) (36,461,586) (60,229) (36,521,815)
------------- ------------- ------------- ------------- ------------- -------------
Profit/(loss)
from operations (284,451) 820,580 536,129 3,694,384 (60,229) 3,634,155
Adjusted EBITDA 3,972,471 4,684,946 8,657,417 8,740,576 3,466,784 12,207,360
Pre-opening costs (978,457) 165,303 (813,154) (165,850) 39,097 (126,753)
Share based payments (362,028) - (362,028) (90,507) - (90,507)
Depreciation and
amortisation (2,563,782) (3,648,996) (6,212,778) (2,688,928) (3,566,110) (6,255,038)
Impairment 208,023 (380,673) (172,650) - - -
Non-trading costs (18,538) - (18,538) (244,639) - (244,639)
Exceptional items (542,140) - (542,140) (1,856,268) - (1,856,268)
------------- ------------- ------------- ------------- ------------- -------------
Profit/(loss)
from operations (284,451) 820,580 536,129 3,694,384 (60,229) 3,634,155
Finance income 1,384 - 1,384 613 - 613
Finance expense (185,323) (1,280,739) (1,466,062) (377,757) (994,747) (1,372,504)
------------- ------------- ------------- ------------- ------------- -------------
Profit/(loss)
before tax (468,390) (460,159) (928,549) 3,317,240 (1,054,976) 2,262,264
Tax credit/(charge) 290,327 - 290,327 (900,690) - (900,690)
------------- ------------- ------------- ------------- ------------- -------------
Profit/(loss)
for the period (178,063) (460,159) (638,222) 2,416,550 (1,054,976) 1,361,574
============= ============= ============= ============= ============= =============
Pre-IFRS 16 IFRS 16 IFRS Pre-IFRS 16 IFRS 16 IFRS
52 weeks adjustments 52 weeks 52 weeks adjustments 52 weeks
ended 1 Jan ended 1 ended 2 Jan ended 2 Jan
Jan
2023 2023 2022 2022
GBP GBP GBP GBP GBP GBP
Fixed assets
Intangible assets 2,632,205 - 2,632,205 - - -
Tangible assets 13,033,022 688,079 13,721,101 8,719,167 545,000 9,264,167
Right-of-use asset - 31,035,358 31,035,358 - 24,939,614 24,939,614
-------------- -------------- -------------- -------------- -------------- --------------
Current assets 15,665,227 31,723,437 47,388,664 8,719,167 25,484,614 34,203,781
Inventories 397,083 - 397,083 326,108 - 326,108
Trade and other
receivables 3,563,818 (1,369,941) 2,193,877 2,308,070 (419,368) 1,888,702
Cash at bank and
in hand 2,375,800 - 2,375,800 9,653,172 - 9,653,172
-------------- -------------- -------------- -------------- -------------- --------------
Total current
assets 6,336,701 (1,369,941) 4,966,760 12,287,350 (419,368) 10,867,982
Trade and other
payables (10,913,989) 1,803,920 (9,110,069) (10,121,084) 2,490,529 (7,630,555)
Lease liabilities - (5,614,340) (5,614,340) - (5,830,987) (5,830,987)
-------------- -------------- -------------- -------------- -------------- --------------
Non-current
liabilities (10,913,989) (3,810,420) (14,724,409) (10,121,084) (3,340,458) (13,461,542)
Loans and borrowings (2,930,481) - (2,930,481) (2,911,941) - (2,911,941)
Lease liabilities - (31,109,551) (31,109,551) - (25,831,103) (25,831,103)
-------------- -------------- -------------- -------------- -------------- --------------
(2,930,481) (31,109,551) (34,040,032) (2,911,941) (25,831,103) (28,743,044)
Net assets 8,157,458 (4,566,475) 3,590,983 7,973,492 (4,106,315) 3,867,177
============== ============== ============== ============== ============== ==============
Equity attributable
to equity holders
of the company
Called up share
capital 386,640 - 386,640 386,640 - 386,640
Share premium
account 4,433,250 - 4,433,250 4,433,250 - 4,433,250
Share based payment
reserve 452,535 - 452,535 90,507 - 90,507
Merger reserve 4,793,170 - 4,793,170 4,793,170 - 4,793,170
Profit and loss
account (1,908,137) (4,566,475) (6,474,612) (1,730,075) (4,106,315) (5,836,390)
----------- ------------- ----------- ----------- ------------- -----------
Total equity 8,157,458 (4,566,475) 3,590,983 7,973,492 (4,106,315) 3,867,177
=========== ============= =========== =========== ============= ===========
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END
FR DQLFLXXLZBBX
(END) Dow Jones Newswires
March 27, 2023 02:00 ET (06:00 GMT)
Grafico Azioni Tortilla Mexican Grill (LSE:MEX)
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Da Mar 2024 a Apr 2024
Grafico Azioni Tortilla Mexican Grill (LSE:MEX)
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Da Apr 2023 a Apr 2024
