REG - Tortilla Mexcn.Grill - Annual Results & Publication of Annual Report
27/03/2023 07:00
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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 £57.7m (FY21: £48.1m),
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 £4.0m (FY21: £8.7m). Notably, FY21
included £3.9m of VAT benefit.
· Gross profit margin was 76.4% (FY21: 79.6%).
· Net debt was £0.6m (FY21: net cash of £6.7m).
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 £69.8m, Adjusted EBITDA £5.0m.
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, Sole Broker) Tel: 020 3100 2222
Andrew Godber
Edward Thomas
Nikhil Varghese
Hudson Sandler (Public Relations) Tel: 020 7796 4133
Alex Brennan tortilla@hudsonsandler.com (mailto:tortilla@hudsonsandler.com)
Wendy Baker
Charlotte Cobb
For further information, visit tortillagroup.co.uk
(https://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 £375,000 to £475,000 (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 £57.7m £48.1m + 20.0%
Gross profit margin 76.4% 79.6% - 3.2% pts
Administrative expenses £43.6m £36.5m + 19.3%
Net (loss)/profit after tax (£0.6m) £1.4m - 147.0%
Cash generated from operations £7.6m £11.7m - 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) £4.0m £8.7m - 54.6%
Net cash/(debt) (pre-IFRS-16)(3) (£0.6m) £6.7m - 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 £57.7m, compared to £48.1m 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 £3.3m; and
· The addition of ten new company-owned sites in FY22 (+£3.2m), as well
as the annualisation of the FY21 openings (+£1.2m).
The above factors are partially offset by a £3.9m 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 £3.9m, 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 £43.6m. 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
£0.5m in FY22 (FY21: £1.8m). The £1.3m decrease was attributable to costs
incurred for the Group's IPO in FY21. Of the £0.5m in FY22, £0.4m 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 ended 52 weeks ended
1 January 2023 2 January 2022
£ £
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 £4.0m of Adjusted EBITDA (pre-IFRS 16) in FY22, a
reduction of £4.7m compared to FY21. This decrease was most notably driven by
the £4.8m 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 £2.5m
against a total consideration of £2.75m. The remaining £0.25m of
consideration is contingent and will be paid upon achieving certain
conditions. The £2.5m initial cash outflow included £1.0m which was paid to
Chilango Ltd for working capital needs.
Financing and net debt
The Group had cash balances of £2.4m on 1 January 2023 which translated to a
net debt position of £0.6m (FY21: net cash of £6.7m).
The Group's £10.0m revolving credit facility (RCF) is held with Santander UK
plc and comprises a drawn balance of £3.0m at 1 January 2023 with a further
£7.0m 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 £0.4m were recognised in FY22 (FY21: £0.1m)
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 £7.0m of financing and this remained
undrawn on 1 January 2023. The Group had cash balances of £2.3m on 1 January
2023 which translated to a net debt position of £0.6m.
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 ended
1 January 2023 2 January 2022
Note £ £
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 £ £
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 up share capital Share premium account Share-based payment reserve Merger reserve Profit and loss account Total equity
£ £ £ £ £ £
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 ended 52 weeks ended
1 January 2023
2 January 2022
£
£
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 £206,060 (2 January 2022:
£1,634,074).
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 £7.0m of financing and this remained
undrawn on 1st January 2023. The Group had cash balances of £2.4m on 1
January 2023 which translated to a net debt position of £0.6m.
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 year 1 to 2 years 2 to 5 years More than 5 years Total
£ £ £ £ £
1 January 2023
Trade and other payables 8,644,982 - - - -
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 £83,000 (2 January 2022:
£136,000), 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 £19,000 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
£11,000, which is not considered to be material.
In the 52 weeks ended 1 January 2023, property, plant and equipment assets of
£13,721,101 and right-of-use assets of £31,035,358 and goodwill of
£2,624,886 have been tested for impairment. Detailed impairment testing
resulted in the recognition of an impairment charge of £160,930 (52 weeks
ended 2 January 2022: £nil) and an impairment reversal of £368,953 (52 weeks
ended 2 January 2022: £nil) against property, plant and equipment assets
(note 16) and an impairment charge of £380,673 (52 weeks ended 2 January
2022: £99,868) 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 £229,000 decrease in depreciation in the 52
weeks ended 1 January 2023 (2 January 2022: £239,000).
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 £nil.
4. Revenue
52 weeks ended 52 weeks ended
1 January 2023 2 January 2022
£ £
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 ended 52 weeks ended
1 January 2023 2 January 2022
£ £
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 ended 52 weeks ended
1 January 2023 2 January 2022
£ £
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 £415,908 of costs incurred in relation to
the acquisition of Chilango Ltd.
52 weeks ended 52 weeks ended
1 January 2023 2 January 2022
£ £
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 2023 2 January 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 2023 2 January
£ 2022
£
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 2023 2 January
£ 2022
£
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 £370,000 (2022 -
£406,200). 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 £240,984 (2022: £60,246).
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 2023 1 January 2023 Weighted average exercise price 2 January 2022 2 January 2022
Number of share options £ Number of share options Weighted average exercise price
# # £
Outstanding at beginning of the period 1,809,393 1.8 - -
Granted during the period Exercised during the period Forfeited during the 205,714 - 1,809,393 1.8
period
- (69,061) - - -
1.8 - -
Outstanding at the end of the period 1.6 1,809,393 1.8
1,946,046
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 £1.62 (2 January 2022: £1.81). 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 £362,028 (2 January 2022: £90,507) and related
employer National Insurance of £9,988 (3 January 2021: £nil).
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 ended
1 January 2023 2 January 2022
£
£
Bank interest income 1,384 613
11. Interest payable and similar expenses
52 weeks ended 52 weeks ended
1 January 2023 2 January 2022
£
£
Bank interest payable 185,323 377,757
Finance cost on lease liabilities 1,280,739 994,747
1,372,504
1,466,062
12. Taxation
52 weeks ended 52 weeks ended
1 January 2023 2 January 2022
£
£
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 2023 2 January 2022
£
£
(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 £1,065,646, 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
£
£
(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 38,664,031 38,664,031
earnings per share
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
£
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
£
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 year 1 to 2 years 2 to 5 years Over 5 years More than 1 year Total
£ £ £ £ £ £
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 software Goodwill Total
£
£ £
Cost
Arising on acquisition 24,600 2,624,886 2,649,486
Disposals (9,100) - (9,100)
At 1 January 2023 2,624,886
15,500 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 £2,624,886 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
£
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 property
£ Plant and machinery Fixtures and
£ fittings Total
£ £
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 6,692,407
16,049,266 5,128,645 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
£
£
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 £13,605,825 (52 weeks ended 2
January 2022: £9,797,235).
18. Trade and other receivables
1 January 2 January
2023 2022
£
£
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
£ £
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
£ £
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
£ £
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 £10m senior facility, repayable in full on 14 September 2026, with a
drawn balance at 1 January 2023 of £3.0m (2 January 2022: £3.0m). The Group
has allocated £2.5m 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 £93,000 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
£ £
Allotted, called up and fully paid
38,664,031 Ordinary shares of £0.01 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
£0.01 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 of subsidiaries Additions and disposals of Finance expense At 1 January
2022 leases 2023
£ £ £ £
£ £
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 adjustments
Book value £ Fair value
£ £
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
4,537,916 (804,417) 3,733,499
Liabilities
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:
£
Cash 100,532
Contingent consideration
250,000
Total purchase consideration
350,532
At acquisition date, Chilango Ltd reported goodwill of £804,417 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 £2,672,467 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 £2.5m. The
acquisition was made on a "cash free, debt free" basis and therefore further
amounts of £1,432,760 were paid to RDCP Group Limited in addition to the
consideration shown above. The Company paid an amount of £966,708 to Chilango
Ltd on acquisition for working capital needs. The contingent consideration of
£250,000 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 £669,708 representing contractual receivables of £669,708.
The Group therefore expects to collect all contractual receivables.
Goodwill arising on acquisition of £2,624,886 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 £30,510 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
£
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 £5,825,447 and the contribution to
the Group's profit would have been £(1,703,390).
An amount £171,717 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 office Principal activity Holding
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 £30,000 for the 52 weeks
ended 1 January 2023 (2 January 2022: £35,000) 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 £12,375
for the 52 weeks ended 1 January 2023 (2 January 2022: £nil) 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 £nil at 1 January 2023 (2 January 2022:
£65,050).
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 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 Jan ended 2 Jan ended 2 Jan
2023 2023 2022 2022
£ £ £ £ £ £
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 Jan ended 2 Jan ended 2 Jan
2023 2023 2022 2022
£ £ £ £ £ £
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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