REG - Tortilla Mexcn.Grill - Annual Results
11/04/2022 07:00
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RNS Number : 8743H Tortilla Mexican Grill PLC 11 April 2022
11 April 2022
Tortilla Mexican Grill plc
("Tortilla", the "Group" or the "Company")
Audited Annual Results for the 52 week period ended 2 January 2022
Publication of Annual Report & Accounts and Notice of Annual General
Meeting
Tortilla wraps up first year with record results
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 financial period ended 2 January 2022 ("the Period").
Financial highlights
· Transformational year: revenues increased 79.5 percent to a
record £48.1m (2020: £26.8m, 2019: £35.4m)
· Achieved in spite of Covid-19 related site closures and
restrictions, and due to strong performance across the existing estate and
addition of new sites
· Like-for-like (LFL) revenue increased 23.8% compared with 2019
· Adjusted EBITDA (pre-IFRS 16) increased 262.5% to £8.7m (2020:
£2.4m, 2019: £2.5m)
· Strong balance sheet, with net cash of £6.7m at the period end,
supports ability to self-fund roll out plans
Operational highlights
· Continued progress in the delivery of accelerated UK restaurant
roll out, with seven new sites added to the estate during the Period, bringing
the total number of sites at the period end to 64
o Three company-run sites opened in Edinburgh, Windsor and Exeter
o Three new delivery kitchens opened, supporting fast-growing delivery
proposition (bringing the total to five at the period end)
o Launch of new partnership with Merlin Entertainments to open at
Chessington World of Adventures
· Expansion of existing partnership with SSP to open two further
sites at Gatwick Airport and Leeds Skelton Services
Current trading & outlook
· Strong trading momentum delivered in the Period has continued into
2022, with LFL growth of 20.1% year to date, in line with expectations
· One new site opened in Q1 2022, one in April and at least seven
further site openings planned, underpinning the Board's confidence in
delivering the Group's target of 45 openings by the end of 2026
· Successful launch of franchise partnership with Compass Group PLC
- four locations now trading with plans to open at least 10 more over the next
five years
· Well-positioned to navigate macroeconomic pressures, supported by
strong brand, value-for-money proposition and flexible operating model
· Very strong platform for continued growth and strategic progress
Richard Morris, Chief Executive Officer of Tortilla, commented:
"Capping off a transformational year for Tortilla, we are very pleased to
announce a record financial performance for the Group's maiden Annual Results
following its successful IPO in October 2021.
"During the year we made excellent progress in delivery of our long-term
growth strategy. We opened further sites in line with our UK roll out plans,
expanded our delivery kitchen estate to fulfil growing customer demand, and
both extended and launched franchise partnerships which introduced the
Tortilla brand to even more customers across the UK. I would like to take this
opportunity to thank our teams both in the UK and internationally for their
commitment and hard work during the year.
"This strong financial and operational momentum has continued into 2022 and
underpinned by our flexible model, value-for-money offer and clear long-term
growth strategy, we are very excited to capitalise on the growth opportunities
presented by the post-pandemic landscape. We remain confident of delivering
our exciting plans for Tortilla to the benefit of all stakeholders."
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 2 January 2022 (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 15 June 2022 at 9:30am 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
Christopher Whitaker
Nikhil Varghese
Hudson Sandler (Public Relations) Tel: 020 7796 4133
Alex Brennan tortilla@hudsonsandler.com (mailto:tortilla@hudsonsandler.com)
Wendy Baker
Lucy Wollam
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. The Group had 68 sites worldwide as of 31 March 2022,
comprising 52 sites in the UK operated by the Group, three sites franchised to
SSP Group in the UK, four sites franchised to Compass Group UK & Ireland
and nine franchised sites in the Middle East.
The Group was founded in 2007 by Brandon Stephens, originally from California
who, upon his arrival in London in 2003, found it difficult to satisfy his
desire 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 brand is synonymous with an energetic, vibrant culture, and with providing
a great value-for-money proposition. It embraces 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
I am delighted to be writing to you after six months of Tortilla being a
public company, through which time we have continued to trade strongly.
Looking back at 2021, it was a year, like 2020, where the Group showed its
versatility and ability to be flexible during the pandemic. It began with
three months of national lockdown as the country dealt with the new Delta
variant. It then ended with the arrival of yet another variant, Omicron,
resulting in government instructions to work from home and to think strongly
about socialising, which naturally suppressed eating out in the run up to
Christmas.
Covid-19 paradoxically became an opportunity for Tortilla. We knew we had a
strong delivery product and during the lockdown periods we introduced the
brand to new customers via delivery, which in turn then saw them return to eat
in our stores when we were allowed to open fully.
Managing the stop-start nature of last year was also a test for the ambition
and resilience of the Tortilla Management team, a test they passed with flying
colours. The fact that, on top of this, they also successfully managed the
significant work of a listing process (arriving on the Alternative Investment
Market ("AIM") in early October) is testament to the quality and ambition of
the Executive Directors Richard Morris, our CEO, and Andy Naylor, our CFO. I
have enjoyed getting to know them, and understanding this great business
better, over the last six months.
The Tortilla investment case - from 50 to 200, and creating a national brand
The Tortilla brand was conceived by Brandon Stephens in 2007 when he arrived
in London to study and struggled to find anywhere to eat the freshly made
burritos he ate when growing up in the Mission District in San Francisco. At
the time that he founded the business, the UK consumer was a bit sceptical
about the quality of Mexican food and needed educating.
Fifteen years later we have a proven model, operating across 64 sites, and
customers are increasingly favouring our food-type and brand. We always have
queues when opening new restaurants which highlights the wide appeal of our
offer. The current property market is giving us access to a very strong
pipeline of new sites and we are confident of opening at least 45 locations
over the next five years.
The product is still made fresh and our central production kitchen allows us
to ensure the quality and consistency of sauces and recipes. Given how well
the product travels on delivery (not all restaurant food does) this is now a
major and growing sales channel within the business. To date we have opened
five delivery-only kitchens and plan to open circa three to four more per year
going forward.
Finally, the business was early to test franchising, with ten sites
established across the Middle East in the United Arab Emirates and Saudi
Arabia, through a partnership with Eathos. Tortilla has gained confidence in
its franchising systems and has extended its franchisee partners to SSP and
then Compass, in the UK. This ability to franchise clearly gives us further
growth opportunities in unchartered locations to supplement our own expansion.
For me, as chair, what excites me about Tortilla is the headroom for growth -
with clear customer white space and the proven flexibility of how the Tortilla
brand can present itself to customers.
Our new Board of Directors
Prior to the IPO, the Board benefitted from the experience of Paul Campbell
and Aarish Patel, both industry veterans and Tortilla fans. I would like to
thank them for all the advice they have given me in taking the reins. However,
I am very pleased to say that the Board retains the institutional memory of
the past and has both Brandon Stephens, the founder, still playing an active
role as Founder Director and Loeïz Lagadec, a Quilvest partner, as Board
members. In terms of new experience, alongside myself (former CEO of Wagamama)
we are delighted to have Laurence Keen, CFO of Hollywood Bowl plc; Laurence
was part of the management team that floated Hollywood Bowl over five years
ago and, along with his experience in the hospitality sector, has some
invaluable insights as we mature as a public company.
Challenges ahead
I anticipate you will have read about the set of challenges facing our sector:
from energy and cost of goods inflation to labour shortages. Tortilla will not
be immune to these, no business will. However, I want to assure you that the
calibre of the Management team as well as the operational simplicity and
flexibility of the offer, mean that we are much better placed than many to
navigate these. We also suspect the ongoing economic conditions will see
customers turn to brands they trust which are also great value for money,
which should play into our Tortilla sweet spot.
I expect 2022 to be an immensely exciting year in the evolution of the
business and the brand, with opportunities outweighing the challenges.
Expansion prospects arising from the favourable property market alongside our
partnerships with SSP and Compass, provide a fantastic opportunity to take
this business to the next level.
Emma Woods
Chair
11 April 2022
CHIEF EXECUTIVE OFFICER'S STATEMENT
2021 was a year of great achievements for Tortilla, during which we delivered
record sales and profits, significant strategic progress and celebrated the
exciting milestone of becoming a public company, which we believe will support
our ability to further capitalise on significant long-term growth
opportunities in the post-Covid-19 casual dining landscape.
The business has shown itself to be extraordinarily well positioned throughout
the pandemic. The Tortilla product proposition is well-suited to the growing
delivery market, and we have proven the brand's flexibility to operate across
a range of locations and formats, including smaller sites and delivery-only
kitchens. As we continue to navigate Covid-19 and the current inflationary
context, I remain incredibly proud of the way Tortilla has risen to the
challenge. Our strong performance during this time showcases the true value of
the Group's flexibility, and our ability to adapt, and indeed thrive, in
difficult circumstances.
In addition to delivering strong revenue growth of nearly 80%, we were pleased
to achieve progress on several strategic objectives, including the launch and
development of various partnerships, and growing our estate of delivery
kitchens and traditional bricks and mortar locations.
Responding to Covid-19
Tortilla's success over the pandemic has been rooted in our business model. By
adjusting our operations several times during this period, we were able to
maximise sales across eat-in, takeaway and delivery channels, resulting in
only minimal temporary closures - in great contrast to the numerous permanent
closures across the industry. Through our re-opening strategy, which optimised
locations in residential areas, we were able to flex according to the changing
trends, meeting new demand from those working from home and turning this
circumstance to our benefit.
Aware of the importance of consistent engagement with our customers, we
maintained our public presence through social media, mirroring our customers'
increased online activity and ensuring our brand remained relevant and
appealing. Equally critical was our relationship with our employees. To
counteract the uncertain climate, we ensured regular communication and updates
to support and retain our team - crucial during the current staff shortages in
hospitality.
Alongside the wider hospitality industry and many other sectors, the Group
received financial government support which enabled us to protect our
financial position and avoid redundancies. However, while many businesses
restructured using company voluntary arrangements ("CVAs") and other methods,
Tortilla engaged in active negotiations with landlords, maintaining our
positive relationships on a fair basis as the UK economy recovers.
Opportunities ahead
As we move forward, we're excited to capitalise on growth opportunities the
post-pandemic landscape presents. As rent levels rebalance, we are
accelerating our UK strategy, building on the success of delivery-only
kitchens and targeting further franchising and licencing opportunities across
a variety of venues looking to add high street brands to their offer.
Our strategy comprises the following key growth pillars, against each of which
I am delighted to report that we delivered strong progress during 2021:
UK roll-out
The primary objective of the Group's growth strategy is to accelerate its UK
presence, with 45 new sites targeted in the UK in the next five years. We
continue to believe that, due to the Covid-19 pandemic and the consequent
negative impact on the wider hospitality industry and commercial property
market, an exceptional opportunity exists for the Group to secure favourable
rental rates and incentive packages and that the Group is well positioned to
capitalise on this.
In 2021, we opened three "bricks and mortar" stores (Edinburgh, Windsor and
Exeter) and we remain confident of opening ten sites in 2022 given our
openings so far this year and upcoming pipeline.
Over the coming years we intend to expand further, seeking opportunities of
increased availability of former retail units and lower post-pandemic rents.
Franchising and partnerships
To support our site expansion, we see exciting opportunities to enter into
franchise agreements that offer capital-light growth opportunities into new
areas for the brand. During 2021 we launched a partnership with Merlin
Entertainments to open at Chessington World of Adventures, and we opened two
further sites in partnership with SSP at Gatwick Airport and Leeds Skelton
Lakes motorway services, taking our total number of sites with SSP to three.
We also commenced a trial with Compass to franchise the Tortilla brand in
higher education UK campuses and, as of the end of February 2022, there are
four locations trading (Brunel, Swansea, Middlesex and Sussex). This is part
of a partnership expected to yield a further ten locations over a five-year
period.
These additional partnerships, on top of our own store rollout, are possible
due to our flexible business model. The simplicity of the fresh food and our
simple kitchen setup enable the brand to explore alternative locations which
are out of reach of many of our competitors.
Delivery-only kitchens
Tortilla's product proposition has been proven to be highly suitable for home
delivery. As well as leveraging our growing site portfolio, we see an exciting
opportunity to open selective delivery-only kitchens. These enable us to
extend the reach of our delivery service, as well as enabling us to introduce
the Tortilla brand to new customers ahead of potentially opening a restaurant
in a new area.
During the year we opened three such kitchens (Balham, Manchester and Brent
Cross), taking the total to five and see the opportunity to open a further
three to four sites per year over the medium term.
International
Tortilla is already the largest fast-casual Mexican chain in the UK and
Europe. With the popularity of burritos and tacos growing worldwide with
successful chains across Europe, Asia, the Middle East and Australia, there is
an opportunity for the Group to establish a broader presence internationally.
The Group is exploring the opportunity to expand into Europe in the mid-term.
During the year, the Group successfully traded from 10 sites operated in the
Middle East by Eathos Ltd, as franchisees.
People, values, and culture
Past, present and future - Tortilla's people, values and culture are the
foundation of our success. By hiring the best people at all levels, we
maintain an inclusive culture where values such as kindness, humility and
integrity are of equal importance as education, experience and skills.
We continue to embrace and encourage diversity throughout our recruitment
practice, and our workforce is now 48 percent non-British national, with more
than half management roles carried out by women. With under 25-year-olds
forming more than 50 percent of our workforce, we believe in nurturing young
talent through training, career development and ongoing support of government
initiatives to help young people into work. Indeed, all staff benefit from
clear development plans including Manager in Training programmes, accredited
qualifications, industry specific apprenticeships and online training, and we
continue working to fill at least half of our management roles with internal
candidates.
We understand that motivated and inspired staff do the best work and have
continued innovating to ensure our workforce is supported and engaged. We
encourage work-life balance for all our employees, pay competitive salaries
with hourly rates above the national minimum and living wage thresholds, and
promote health and wellbeing through our free employee assistance programme.
As well as regular staff socials and recognition through awards, teams are
incentivised for outstanding sales performance and service. One such incentive
includes a team day out for the restaurant team with the best customer
feedback, for which our Head Office run the restaurant for the day - quite a
challenge for us…!
Our annual assessment of staff engagement gathers insight both in-store and at
our head office, and this year suggested that our teams were happy with the
way the company communicated and handled the pandemic, leading to an overall
score of 90 percent satisfaction.
Moving forward
As we write this, the global economic and political situation remains
difficult, which will test us all, but we also know that Tortilla is a
resilient, dynamic enterprise, and generally in a better place than most of
our competitors to deal with economic downturns. This report details the
strategy and results achieved against the odds and presents the Tortilla Group
as a leading light in the future of the hospitality sector.
We're very excited to capitalise on growth opportunities the post-pandemic
landscape presents. As rent levels rebalance, we are accelerating our UK
strategy, building on the success of delivery-only kitchens and targeting
further franchising and licencing opportunities across a variety of venues.
Richard Morris
Chief Executive Officer
11 April 2022
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. Almost half our estate and five of our top ten selling
stores are located outside of London, covering a wide range of sites including
shopping centres, high streets, residential areas, theme parks, 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 who drive widespread engagement across the most popular
social media platforms. Last year saw the launch of our Tik Tok channel,
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 2021, the Group had 64 sites worldwide: 51 UK sites we operate
ourselves, three UK sites franchised to SSP, and ten 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 29 sites within the M25 area and 22 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 £250,000 to £425,000 depending on the size of the unit, site
condition and store front requirements.
The Group aims for a 35 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 2021 (four bricks
and mortar and three delivery kitchens) along with two new SSP franchise
units.
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. The Group aims to open a further 45 sites in the next five years
including traditional sites, delivery-only kitchens and smaller sites which
focus more on delivery/takeaway. In 2019 a Deloitte Whitespace Report
confirmed over 120 additional UK sites met the Group's ideal location
criteria.
CHIEF FINANCIAL OFFICER'S REVIEW
Group financial KPI summary
2021 2020 Change
Revenue £48.1m £26.8m + 79.5%
Gross profit margin 79.6% 77.4% + 2.2% pts
Administrative expenses £36.5m £24.7m + 47.8%
Net profit/(loss) after tax £1.4m (£1.7m) + 182.4%
Cash generated from operations £11.7m £4.2m + 178.6%
Alternative performance measures ("APMs")
LFL revenue growth (vs 2019)(1) 23.8% 0.0% + 23.8% pts
Adjusted EBITDA (pre-IFRS 16)(2) £8.7m £2.4m + 262.5%
Net cash/(debt) (pre-IFRS-16)(3) £6.7m (£2.3m) + 391.3%
(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.
Last year was transformational for the Group, with record profits and a
successful admission to AIM on Friday 8(th) October. To say we are pleased
with our year, considering the backdrop of the pandemic, would be an
understatement and we remain excited about our future.
Revenues
Much like the prior year, 2021 was defined by the pandemic with revenues in Q1
2021 particularly impacted by the lockdowns imposed by the UK Government.
Despite this challenge, revenue increased to £48.1m which represents an
increase of 79.5 percent compared to 2020. This was achieved through strong
performance of the existing estate and the addition of seven new restaurants
(three of which were delivery-only kitchens). The existing estate performed
very strongly, achieving LFL sales growth of 23.8 percent compared to the
pre-pandemic levels of 2019 (excluding Q1, this LFL sales growth increases to
30.3 percent).
In 2021, 285 trading weeks (11% of the total possible) were lost across the
estate due to store closures arising because of the pandemic. We remain
optimistic that the trading conditions in 2022 will be better due to the
easing of restrictions and improved immunity from the pandemic.
The Group performs well across all store formats and throughout the UK.
Incredibly, in spite of the challenges the pandemic presented us with, 73
percent of stores achieved a record sales week in 2021 and the profitability
levels inside and outside of the M25 remain comparable (average Store Adjusted
EBITDA of £350k and £300k respectively). This provides us with confidence
over the ability of the Group to continue the rollout to all corners of the
UK.
Gross profit margin
The Group achieved a record gross profit margin in 2021 of 79.6 percent (2020:
77.4 percent). This increase was driven by several factors:
(1) an increased proportion of sales via the delivery channel (delivered
products are charged at a slightly higher price to cover commission costs and
these are reported as administrative expenses);
(2) effective pricing negotiations with suppliers;
(3) improved efficiency at a store level to minimise waste and other
losses; and
(4) the benefit of a reduction rate of VAT on some of the Group's products
(reduced from 20 percent to 5 percent until 30 September 2021 and then 12.5
percent for the remainder of the year).
Administrative expenses
Under application of IFRS 16, administrative expenses exclude property rents
(except for turnover rent) but incorporate the depreciation of right-of-use
assets however in both 2020 and 2021, these two factors largely offset.
Administrative costs increased by 47.8 percent year-on-year to £36.5m with
this being driven by the increased level of trade in 2021 as the restaurants
were closed for a longer period during 2020 than 2021. In both years, the
Group utilised the available government support during periods of closure via
the Coronavirus Job Retention Scheme ("CJRS").
Administrative expenses also incorporate exceptional items which increased to
£1.9m in 2021 (2020: 0.3m). The £1.6m increase is attributable to costs
incurred for the Group's IPO with a further £0.5m of IPO cost incurred
relating to the issuing of new shares (recorded as a deduction in share
premium). This apportionment between exceptional items and share premium has
been undertaken in accordance with IAS 32.
As a percentage of revenue, administrative expenses decreased from 92.2
percent (2020) to 75.9 percent (2021) due to the improved nature of trading in
2021 as a substantial portion of the Group's property costs are fixed in
nature.
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 53 weeks ended
2 January 2022 3 January 2021
£ £
Profit/(loss) from operations 3,634,155 (469,275)
Pre-opening costs 126,753 78,778
Share option expense 90,507 -
Depreciation and amortisation 6,255,038 5,796,178
Exceptional items 1,856,268 272,182
Non-trading costs 244,639 60,100
IFRS 16 adjustment (3,466,784) (3,376,630)
Adjusted EBITDA (pre-IFRS 16) 8,740,576 2,361,333
The Group generated £8.7m of Adjusted EBITDA (pre-IFRS 16), an improvement of
£6.3m compared to 2020. The improved performance was largely generated by the
strong sales performance of the business as we were able to introduce the
brand to new customers during the pandemic. This customer acquisition arose
due to the Group generally re-opening ahead of competitors and heavily
engaging with both new and existing customers during this period.
When other businesses re-opened, despite the increased competition, the newly
acquired customers remained loyal and the Group's sales went from strength to
strength as 2021 progressed.
Operational cost controls were well controlled in the period and along with
utilisation of Government support, resulted in Adjusted EBITDA (pre-IFRS 16)
(as a percentage of sales) improving to 18 percent (2020: 9 percent).
Cash flow
Cash generated from operations increased in line with the improvement in
Adjusted EBITDA, save for the settlement of a number of 2020 working capital
related cash flows (namely leasehold payments) that were deferred to early
2021.
Cash expenditure on property, plant and equipment increased due to both the
addition of more new sites in 2021 compared to 2020 and higher maintenance
capital costs arising from numerous refurbishments when the Group re-opened
the estate in the early part of the year.
A significant cash outflow arose from the restructuring of the Group's banking
facilities prior to the IPO as the previous debt facilities were fully repaid
(£12.6m). The following cash inflows partially offset this: (1) a £3.0m
drawdown on a new debt facility as outlined further below; and (2) a primary
raise of £5.0m from the IPO less £2.2m of fees (£1.6m recorded as
exceptional costs and the remainder recorded in equity).
Financing and net debt
The Group's net debt position has been materially reversed during the course
of 2021 to a net cash position of £6.7m at 2 January 2022 (3 January 2021:
net debt of £2.3m). The business is highly cash generative, benefits from a
negative working capital cycle and is accordingly able to fund the new store
openings from own cash.
The Group's £10.0m revolving credit facility (RCF) is held with Santander UK
plc and comprises of a drawn balance of £3.0m at 2 January 2022 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, subject to an upward-only ratchet based on increased net leverage
levels and is secured until 14 September 2026.
Share based payments
As part of the Group's admission to AIM, a Long Term Incentive Plan ("LTIP")
was created for senior Management. The detail of this scheme for the Executive
Directors is noted in the remuneration report. These options vest subject to
continuous employment over a three and four year period, and attainment of
certain performance conditions relating to Adjusted EBITDA (pre IFRS-16).
The Group recognised a total charge of £0.1m in 2021 in relation to the
Group's share-based payment arrangements.
Dividend
The Board did not recommend a dividend for 2021. The Group's capital over
the coming years will be deployed to growth 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 2 January 2022, the Directors have
considered the Group's cash flow, liquidity and business activities, as well
as the ongoing uncertainty caused by the Covid-19 pandemic.
The hospitality sector has been particularly impacted by Covid-19 and the
Group has taken a number of actions to improve liquidity to ensure it is well
placed to operate through the pandemic and to achieve its strategic goals.
During 2021, the Group successfully listed on the AIM market which gave the
Group access to additional capital and combined with the strong cash
generation of the business, enabled the Group to reduce the borrowing
facilities from £11.9m to £3.0m. The Group has access to a further £7.0m
of financing and this remained undrawn on 2(nd) January 2022. The Group had
cash balances of £9.7m on 2 January 2022 which translate to a net cash
position of £6.7m.
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.
Approved by the Board on 11 April 2022 and signed on its behalf by:
Andy Naylor
Chief Financial Officer
FINANCIAL STATEMENTS
Consolidated statement of comprehensive income
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
Note £ £
Revenue 4 48,075,399 26,832,846
Cost of sales (9,797,235) (6,054,932)
Gross profit 38,278,164 20,777,914
Other operating income 5 1,877,806 3,489,162
Administrative expenses (36,521,815) (24,736,351)
Profit/(loss) from operations 6 3,634,155 (469,275)
Finance income 9 613 111,791
Finance expense 9 (1,372,504) (1,335,748)
Profit/(loss) before tax 2,262,264 (1,693,232)
Tax charge 10 (900,690) -
Profit/(loss) for the period and comprehensive income attributable to equity 1,361,574 (1,693,232)
holders of the parent company
Earnings/(loss) per share for profit attributable to the owners of the parent
during the period
Basic and diluted (pence) 11 3.5 (471.6)
The accompanying notes within this announcement form an integral part of these
Financial Statements.
Consolidated statement of financial position
At At
2 January
3 January
2022
2021
Note £ £
Non-current assets
Right-of-use assets 12 24,939,614 25,324,841
Property, plant and equipment 13 9,264,167 9,112,143
Total non-current assets 34,203,781 34,436,984
Current assets
Inventories 14 326,108 239,782
Trade and other receivables 15 1,888,702 1,898,295
Cash and cash equivalents 16 9,653,172 10,086,759
Total current assets 11,867,982 12,224,836
Total assets 46,071,763 46,661,820
Current liabilities
Trade and other payables 17 6,729,865 4,909,704
Lease liabilities 12 5,830,987 7,176,104
Loans and borrowings 18 - 1,000,000
Corporation tax liability 10 900,690 -
Total current liabilities 13,461,542 13,085,808
Non-current liabilities
Lease liabilities 12 25,831,103 24,195,555
Loans and borrowings 18 2,911,941 11,426,235
Total non-current liabilities 28,743,044 35,621,790
Total liabilities 42,204,586 48,707,598
Net assets / (liabilities) 3,867,177 (2,045,778)
Equity attributable to equity holders of the company
Called up share capital 19 386,640 359,016
Share premium account 20 4,433,250 -
Merger reserve 20 4,793,170 4,793,170
Share based payment reserve 20 90,507 -
Retained earnings 20 (5,836,390) (7,197,964)
Total equity 3,867,177 (2,045,778)
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 by the Board and authorised for
issue on 11 April 2022. They were signed on its behalf by:
Andy Naylor
Chief Financial Officer
11 April 2022
Consolidated statement of changes in equity
Share capital Share premium Merger reserve Share-based payment reserve Retained earnings Total
£ £ £ £ £ £
Balance as at 29 December 2019 359,016 - 4,793,170 - (5,504,732) (352,546)
Loss for the period - - - - (1,693,232) (1,693,232)
Balance as 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
Newly issued equity shares 27,624 4,972,376 - - - 5,000,000
Cost of issue of equity shares - (539,126) - - - (539,126)
Share-based payments - - - 90,507 - 90,507
Balance as at 2 January 2022 386,640 4,433,250 4,793,170 90,507 (5,836,390) 3,867,177
The accompanying notes within this announcement form an integral part of these
Financial Statements.
Consolidated statement of cash flows
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
Note £ £
Operating activities
Profit/(loss) after tax 1,361,574 (1,693,232)
Adjustments for:
Share based payments 8 90,507 -
Net finance expense 9 377,144 228,168
Finance cost on lease liabilities 9 994,747 995,789
Corporation tax charge 10 900,690 -
Depreciation of right to use assets 12 3,514,015 3,495,701
Impairment of right to use assets 12 99,868 (66,584)
Depreciation of property, plant and equipment 13 2,634,304 2,033,690
Impairment of property, plant and equipment 13 - 333,371
Loss on disposal of property, plant and equipment 13 6,852 -
Increase in inventories 14 (86,326) (3,739)
Decrease in trade and other receivables 15 9,593 56,064
Increase/(decrease) in trade and other payables 17 1,820,161 (1,197,011)
Cash generated from operations 11,723,129 4,182,217
Investing activities
Interest received 9 613 1,964
Purchase of property, plant and equipment 13 (2,793,181) (1,404,116)
Net cash used by investing activities (2,792,568) (1,402,152)
Financing activities
Proceeds from issue of shares 5,000,000 -
Cost of issue of shares (539,126) -
Payments made in respect of lease liabilities 12 (3,932,971) (655,652)
Interest paid (203,303) (284,549)
New loans secured 18 2,907,306 3,846,600
Repayment of loans 18 (12,596,054) (1,200,000)
Net cash (used by)/generated from financing activities (9,364,148) 1,706,399
Net (decrease)/increase in cash and cash equivalents (433,587) 4,486,464
Cash and cash equivalents at the beginning of period 16 10,086,759 5,600,295
Cash and cash equivalents at the end of period 9,653,172 10,086,759
Notes to the consolidated financial information
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.
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 brand both within the United Kingdom and the Middle
East.
2. Accounting policies
2.1 Statement of Compliance
The consolidated financial statements have been prepared in accordance with
International Account Standards in conformity with the requirements of the
Companies Act 2006 and in accordance with International Financial Reporting
Standards.
2.2 Basis of preparation
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, the
consolidated statement of cash flows and related notes for the companies which
comprise the Group.
2.3 New standards, amendments and interpretations adopted
In May 2020 the IASB issued COVID-Related Rent Concessions (Amendments to IFRS
16) that provided a practical expedient permitting lessees not to assess
COVID-related rent concessions as a lease modification. The Group has opted
not to apply this amendment.
Other amendments applied for the first time for the 52 weeks ending 2 January
2022 were:
· Definition of material - amendments to IAS 1 and IAS 8;
· Definition of a business - amendment to IFRS 3;
· Revised conceptual framework for financial reporting; and
· Interest rate benchmark reform - amendments to IFRS 9, IAS 39 and
IFRS 7.
The application of these did not have a material impact on the Group's
accounting treatment and has therefore not resulted in any material changes.
2.4 Standards issued not yet effective
Standard/Amendments Applicable for financial periods beginning on/after
IAS 37 Onerous contracts - Cost of fulfilling a contract 1 January 2022
Annual improvements to IFRS standards 2018-2020 1 January 2022
IAS 16 Property, plant and equipment: proceeds before intended use 1 January 2022
IFRS 3 Reference to the conceptual framework 1 January 2022
IFRS 17 Insurance contracts 1 January 2023
IFRS 17 Amendments 1 January 2023
IAS 1 Classification of liabilities as current or non-current 1 January 2023
IAS 1 Disclosure of accounting policies 1 January 2023
IAS 8 Definition of accounting estimates 1 January 2023
IAS 12 Deferred tax related to assets and liabilities arising from a single 1 January 2023
transaction
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 consolidated financial information incorporates the results of a business
combination using the predecessor method. Specifically, this is the
acquisition of Mexican Grill Ltd, which meets the definition of a common
control business combination and is therefore outside the scope of IFRS 3.
In the consolidated statement of financial position, the acquiree's
identifiable assets, liabilities and contingent liabilities are initially
recognised at their carrying values at the acquisition date.
The comparative figures for share capital are restated as if the entities had
been combined at the earliest reporting date presented. The consolidated share
capital at 29 December 2019 and 3 January 2021 therefore represents the share
capital of Mexican Grill Ltd adjusted for the share capital issued for the
purposes of the business combination.
The consolidated statement of financial position as at 2 January 2022
incorporates the results of Tortilla Mexican Grill plc and its subsidiaries
for all periods.
2.6 Going concern
In assessing the going concern position of the Group for the consolidated
financial statements for the 52 weeks ended 2 January 2022, the Directors have
considered the Group's cash flow, liquidity and business activities, as well
as the ongoing uncertainty caused by the COVID-19 pandemic.
The hospitality sector has been particularly impacted by COVID-19 and the
Group has taken a number of actions to improve liquidity to ensure it is well
placed to operate through the pandemic and to achieve its strategic goals.
During 2021, the Group successfully listed on AIM which gave the Group access
to additional capital and combined with the strong cash generation of the
business, enabled the Group to reduce the borrowing facilities to a principal
amount of £3.0m. The Group has access to a further £7.0m of financing and
this remained undrawn as at 2 January 2022. The Group had cash balances of
£9.7m as at 2 January 2022 which translate to a net cash position of £6.7m.
The Group has prepared forecasts for the next twelve months, including a base
case and a severe downside case.
The base case assumes that there are no further lockdowns or restrictions and
assumes no further government financial support. In this forecast there are no
loan drawdowns and the Group remains in compliance with its covenant
obligations.
Under the severe downside case the following adjustments are made:
· Sales reduced by 20 percent in the second quarter of 2022 to model
a further prolonged lockdown;
· Sales reduced by 10 percent in the third quarter and 5 percent for
the remainder of the year to incorporate the impact of increased restrictions
throughout 2022; and
· No further government support, such as reduced VAT, the reintroduction
of the Coronavirus Job Retention Scheme or business rates relief, has been
assumed.
Whilst this scenario would reduce Adjusted EBITDA by 29 percent, the Group
would still have sufficient liquidity and remain in a net cash position.
Consequently, the Group would not need to make a further drawdown and would
remain in compliance with its covenant obligations. The Directors have also
performed reverse stress testing to assess the conditions that would lead to a
covenant breach. The Directors are comfortable with the outcome of this
exercise.
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 recognition
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 a third-party delivery partner, which is payable the week after the
revenue was recorded. The delivery partner charges a commission on these
sales, which are recognised within administrative expenses. 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 material.
2.8 Alternative Performance Measures ("APM's")
The Group has identified certain measures that it believes will assist the
understanding of the performance of the business. These APM's are not defined
or specified under the requirements of IFRS. The Group believes that these
APM's, 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 APM's 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.
2.9 Employee benefits
i. 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.
ii. Defined contribution plan
Contributions to defined contribution schemes are charged to the consolidated
statement of comprehensive income in the financial period to which they
relate.
2.10 Leased assets
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 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. After the
commencement date, the amount of lease liabilities is increased to reflect the
accretion of interest and reduced for the lease payments made. 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.
2.11 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 provided on all items of property, plant and equipment so as
to write off their carrying value over the expected useful economic lives. It
is provided at the following rates:
Short term leasehold property - over
the lease term
Plant and machinery
- over 5 years
Fixtures and fittings
- over 3 years
Office equipment -
over 3 years
Computer equipment
- over 3 years
2.12 Impairment
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).
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.
2.13 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.
2.14 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.
2.15 Deferred taxation
Deferred tax assets and liabilities 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 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.
2.16 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.
2.17 Financial assets
Financial assets held at amortised cost are trade and other receivables and
cash.
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 netted against the loan balance
and amortised on a straight line basis 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. If
objective evidence of impairment is found, an impairment loss is recognised in
the consolidated statement of comprehensive income.
2.18 Financial liabilities
Financial liabilities held at amortised cost include trade and other payables,
lease liabilities and borrowings.
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.
2.19 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.
i. 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. Given the quantum of the borrowings
and the current low interest environment, the risk is not considered material
and therefore the Directors have accepted this risk with the position being
regularly re-assessed based on wider macro-economic conditions.
ii. 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.
iii. 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.
iv. 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.
v. 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.
vi. Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due.
Management review cash flow forecasts regularly to determine whether the Group
has sufficient cash reserves to meet future working capital requirements.
Maturity analysis
The table below analyses the Group's contractual undiscounted cash flows for
the Group's financial liabilities.
Within 1 year 1 to 2 years 2 to 5 years More than 5 years Total
£ £ £ £ £
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 January 2021
Trade and other payables 4,909,704 - - - 4,909,704
Lease liabilities 7,176,104 3,864,422 9,140,207 11,190,926 31,371,659
Borrowings 1,000,000 1,300,000 10,126,235 - 12,426,235
13,085,808 5,164,422 19,266,442 11,190,926 48,707,598
2.20 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.
2.21 Government grants
Coronavirus job retention scheme grants (CJRS) and other government grants are
recognised under the accruals model with any deferred element included in
creditors 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.
3. Critical accounting estimates and judgements
The Group makes certain 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. In the future, actual
experience may differ from these estimates and assumptions. 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.
3.1 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 is 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 weighted average discount rate
applied to the Group's leases is 3.4 percent, there has been a judgement
applied that the portfolio has the same discount rate. For the lease
liabilities at 2 January 2022 a 0.5 percent increase in the discount rate
would reduce the total liabilities by £136,000, which is not considered
material.
3.2 Impairment of right-of-use assets and property, plant and equipment
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 main 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.
An independent external consultancy was engaged to calculate the Group's WACC
and reasonable changes in the key assumptions were assessed, which did not
lead to a material impairment.
3.3 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 £239,000 decrease in depreciation in 2021.
3.4 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.
4. Revenue
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Sale of goods 47,769,278 26,821,338
Franchise income 306,121 11,508
48,075,399 26,832,846
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
There are similar economic characteristics between these businesses 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 53 weeks ended
2 January 2022 3 January 2021
£ £
Eat Out to Help Out income - 473,401
CJRS income(1) 491,825 3,015,761
Other government grants(2) 1,385,981 -
1,877,806 3,489,162
(1) Coronavirus Job Retention scheme
(2) Includes Retail Leisure Hospitality Grant, Local Restriction Support
Grants and Restart Grants
6. Profit/(loss) from operations
Profit/(loss) from operations is stated after charging:
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Depreciation & amortisation 6,148,319 5,529,391
Impairment of ROU assets 99,868 (66,584)
Loss on disposal of fixed assets 6,852 -
Impairment of fixed assets - 638,668
Reversal of impairment of fixed assets - (305,297)
variable lease payments 615,613 113,619
Inventories - amounts charged as an expense 9,797,235 6,054,932
Staff costs 14,333,277 11,268,458
Share option expense 90,507 -
Pre-opening costs 126,753 78,778
Exceptional items(1) 1,856,268 272,182
Quilvest monitoring fees(2) 70,185 38,089
Bank arrangement fee amortisation 174,454 22,011
Auditors' remuneration:
Audit fees 77,000 36,000
Tax compliance services 14,000 35,000
Other assurance services 95,000 -
(1) Exceptional items in 2021 includes £1,634,070 of costs incurred in
relation to the sale by existing shareholders of their shares in the Group's
IPO. A further £539,126 was incurred in relation to the issuing of new shares
and this has been recorded as a deduction in share premium. This apportioning
between exceptional items and share premium has been undertaken in accordance
with IAS 32.
(2) Quilvest monitoring fees were payable prior to the Group's admission to
AIM.
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Pre-opening costs 126,753 78,778
Number of site openings in period 7 4
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. 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. Staff costs
The average monthly number of employees, including the Directors, during the
period was as follows:
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
Operations staff` 749 644
Head office staff 36 31
785 675
Staff costs, including Directors' remuneration, were as follows:
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Wages and salaries 13,315,004 10,527,999
Social security costs 779,134 611,249
Pension costs 148,632 129,210
Share based payments (note 8) 90,507 -
14,333,277 11,268,458
Directors' remuneration, included in staff costs, was as follows:
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Short-term employee benefits 718,900 362,995
Post-employment benefits 3,300 2,679
722,200 365,674
The highest paid Director received remuneration of £367,900 in the 52 weeks
ended 2 January 2022 (3 January 2021: £182,512).
The number of Directors receiving pension contributions was 4 in the 52 weeks
ended 2 January 2022 (3 January 2021: 4).
The share based payment expense arising from the Directors participation in
the Group's LTIP scheme in the 52 weeks ended 2 January 2022 was £60,246 (3
January 2021: £nil).
There are no Key Management Personnel other than the Directors. Further
information about the remuneration of individual Directors is provided in the
Remuneration report within the Group's 2021 Annual Report.
8. 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 period to exercise,
based on the Group's estimate of shares that will eventually vest.
The Group is liable for employer's National Insurance on the difference
between the market value at date of exercise and exercise price and therefore
this expense is also calculated based on the intrinsic value at the balance
sheet date.
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.
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:
2 January 2022 3 January 2021
Number of share options Weighted average exercise price Number of share options Weighted average exercise price
# £ # £
Outstanding at beginning of the period - - - -
Granted during the period 1,809,393 1.81 - -
Exercised during the period - - - -
Forfeited during the period - - - -
Outstanding at the end of the period 1,809,393 1.81 - -
Exercisable at the end of the period - 1.81 - -
The awards outstanding at the end of 2 January 2022 have a remaining weighted
average contractual life of three years (3 January 2021: £nil) and an
exercise price of £1.81 (3 January 2021: £nil).
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 2 January 2022 of £90,507 (3 January 2021: £nil) 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:
2 January 2022 3 January 2021
Weighted average share price (pence) 1.81 -
Exercise price (pence) 1.81 -
Expected volatility (%) 43% -
Option life (years) 5.0 -
Risk free interest rate (%) 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.
9. Finance income and expenses
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Finance income
Bank interest income 613 111,791
Finance expense
Bank loan interest expense (377,757) (339,959)
Finance cost on lease liabilities (994,747) (995,789)
(1,372,504) (1,335,748)
On 14(th) September 2020, the Group obtained a Coronavirus Business
Interruption Loan Scheme ("CBILS") which carries zero interest costs for the
first twelve months. The loan was initially recognised at the present value
of the future payments with the discount of £109,827 being recognised as
finance income in the 53 weeks ended 3 January 2021. Subsequently, in October
2021, the loan was paid off in full, there was an unwinding of interest of
£76,427 in the financial period.
10. Taxation
52 weeks ended 53 weeks ended
2 January 2022 3 Jan 2021
£ £
Current tax expense
Current tax on profits for the period 900,690 -
900,690 -
The reasons for the difference between the actual tax charge for the financial
period and the standard rate of corporation tax in the United Kingdom applied
to profit for the financial period as follows:
52 weeks ended 53 weeks ended
2 January 2022 3 Jan 2021
£ £
Profit/(loss) for the period 2,262,264 (1,693,232)
Expected tax charge based on corporation tax rate of 19% in 2021 (19% in 2020) 429,830 (321,714)
Effects of:
Expenses not deductible for tax purposes 344,578 96,217
Depreciation in excess of capital allowances 319,969 54,735
Movement in tax losses (202,473) (5,022)
Other timing differences, primarily arising from operating lease accounting 8,786 175,784
Other adjustments - -
Deferred tax - -
Total tax charge for the period 900,690 -
In the 53 weeks ended 3 January 2021, the Group had a brought forward tax loss
of £1,065,646, which has been fully utilised in the 52 weeks ending 2 January
2022.
The Group has had unprovided deferred tax assets as shown below:
52 weeks ended 53 weeks ended
2 January 2022 3 Jan 2021
£ £
Unprovided deferred tax asset (535,863) (415,628)
The deferred tax assets arise from tax losses, timing differences on fixed
assets and timing differences arising from the differences in the deductions
available under UK GAAP and IFRS in relation to leases. No asset has been
recorded in the financial statements for these amounts on the grounds that the
timing and extent of any recovery is subject to a number of uncertainties.
In March 2021, the government confirmed that the corporation tax main rate
would increase to 25 percent from 1 April 2023. Accordingly, the rate used to
calculate the deferred tax balances at 2 January 2022 has increased from 19
percent to 25 percent as the timing of the release of this asset is materially
expected to be after this date.
11. 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.
52 weeks ended 53 weeks ended
2 January 2022 3 January 2021
£ £
Profit/(loss)
Profit/(loss) used in calculating basic and diluted profit 1,361,574 (1,693,232)
Number of shares
Weighted average number of shares for the purpose of basic and diluted 38,664,031 359,016
earnings per share
Basic and diluted earnings/(loss) per share (p) 3.5 (471.6)
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.
12. Leases
The Group leases all properties with typical lease lengths of 10-15 years.
All leases are non-cancellable with various terms: payments of a
fixed/variable nature, rent reviews and differing renewal terms.
Application of IFRS 16 requires that leases are recognised as a right-of-use
asset and a corresponding liability at the date at which the leased asset is
available for use by the Group. For adjustments recognised as a consequence of
IFRS 16, please refer to note 27.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of fixed
payments (including in-substance fixed payments), less any lease incentives
receivable, and variable lease payment that are based on an index or a rate,
initially measured using the index or rate as at the commencement date. It
excludes variable lease payments that are turnover linked, which are outside
the scope of IFRS 16 and are charged to the consolidated statement of
comprehensive income as they are incurred.
At the commencement date of property leases the lease liability is calculated
by discounting the lease payments. Lease payments to be made under reasonably
certain extension options are also included in the measurement of the
liability. The lease payments are discounted using the interest rate implicit
in the lease. If that rate cannot be readily determined, which is generally
the case for leases in the Group, the lessee's incremental borrowing rate is
used, being the rate that the Group 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 an 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.
Right-of-use assets £
At 30 December 2019 27,845,165
Additions 1,863,541
Depreciation (3,495,701)
Impairment 66,584
Disposals (954,748)
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
Lease liabilities £
At 30 December 2019 (30,122,727)
Additions (1,863,541)
Interest expense (995,789)
Lease payments 655,652
Disposals 954,746
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)
Carrying amount by maturity of the Groups lease liabilities
Less than 1 year 1 to 2 years 2 to 5 years Over 5 years More than 1 year Total
2 Jan 2022 5,830,987 4,225,074 10,085,891 11,520,138 25,831,103 31,662,090
3 Jan 2021 7,176,104 3,864,422 9,140,207 11,190,926 24,195,555 31,371,659
13. Property, plant and equipment
Leasehold improvements Plant and machinery Furniture, fittings and equipment Total
£ £ £ £
Net book value
At 29 December 2019 7,896,056 1,474,005 705,027 10,075,088
Cost
At 29 December 2019 13,007,215 4,229,945 3,736,455 20,973,615
Additions 400,434 275,695 727,987 1,404,116
Disposals 2,303 (785,404) (1,384,479) (2,167,580)
At 3 January 2021 13,409,952 3,720,236 3,079,963 20,210,151
Accumulated Depreciation
At 29 December 2019 (5,111,159) (2,755,940) (3,031,428) (10,898,527)
Charge for year (859,053) (720,817) (453,820) (2,033,690)
On disposals (2,303) 785,404 1,384,479 2,167,580
Impairment charge (638,668) - - (638,668)
Impairment losses written back 305,297 - - 305,297
At 3 January 2021 (6,305,886) (2,691,353) (2,100,769) (11,098,008)
Net book value
At 3 January 2021 7,104,066 1,028,883 979,194 9,112,143
Cost
At 3 January 2021 13,409,951 3,720,236 3,079,963 20,210,150
Additions 886,575 463,522 1,443,084 2,793,181
Disposals (1,097) (562,202) (851,467) (1,414,766)
At 2 January 2022 14,295,429 3,621,556 3,671,580 21,588,565
Accumulated Depreciation
At 3 January 2021 (6,305,886) (2,691,353) (2,100,769) (11,098,008)
Charge for year (1,230,421) (646,518) (757,365) (2,634,304)
On disposals (157) 560,408 847,663 1,407,914
At 2 January 2022 (7,536,464) (2,777,463) (2,010,471) (12,324,398)
Net book value
At 2 January 2022 6,758,965 844,093 1,661,109 9,264,167
14. Inventories
At At
2 January 2022 3 January 2021
£ £
Food and beverages for resale 326,108 239,782
326,108 239,782
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 £9,797,235 (53 weeks ended 3
January 2021: £6,054,932).
15. Trade and other receivables
At At
2 January 2022 3 January 2021
£ £
Trade debtors 298,334 332,155
Other debtors 735,324 761,377
Prepayments and accrued income 855,044 804,763
1,888,702 1,898,295
Trade debtors 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 debtors 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.
16. Cash and cash equivalents
At At
2 January 2022 3 January 2021
£ £
Cash at bank and in hand 9,653,172 10,086,759
9,653,172 10,086,759
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.
17. Trade and other payables
At At
2 January 2022 3 January 2021
£ £
Trade payables 2,331,636 2,346,463
Other taxation and social security 508,850 606,152
Other payables 456,830 343,327
Accruals and deferred income 3,432,549 1,613,762
6,729,865 4,909,704
The carrying value of trade and other payables classified as financial
liabilities measured at amortised, which the Directors consider equal to fair
value.
18. Borrowings
At At
2 January 2022 3 January 2021
£ £
Bank loans - falling due within one year - 1,000,000
Bank loans - falling due after one year 3,000,000 11,596,054
Subtotal 3,000,000 12,596,054
Amortised issue costs (88,059) (169,819)
2,911,941 12,426,235
Prior to the Group's IPO on 8 October 2021, the following facilities were held
with Santander UK plc:
· Term loan: repayable in instalments until 14 November 2025. The
balance on this loan at 3 January 2021 was £9,672,482 with £1,000,000 due
within one year;
· CBILS loan: repayable in full on 14 November 2025. The total
size of this facility was £4,000,000 with a drawn balance on this loan at 3
January 2021 of £3,000,000. The additional £1,000,000 of undrawn funds
were not utilised as the financial position of the business was strong enough
to not require the additional support. This loan was subject to an initial
one-year interest holiday was recognised at the present value of the future
cash flows, being £2,923,572 at 3 January 2021; and
· CBILS overdraft: this facility was not utilised by the Group.
The total quantum of undrawn funds was £1,000,000.
The term loan accrued interest at rates of 3.25% - 4.50% plus base rate and
the CBILS loan attracted interest at a rate of 3.8% plus base rate, although
was subject to an initial one-year interest holiday and hence was recognised
at the present value of the future cash flows. These loans were all secured
by fixed and floating charges over the assets of the Group.
As part of the Group's IPO, the existing facilities were repaid and a new
financing arrangement was signed, once more with Santander UK plc. This is a
£10m senior facility, repayable in full on 14 September 2026, with a drawn
balance at 2 January 2022 of £3.0m. The Group has allocated £2.5m of the
remaining undrawn amount to an ancillary facility, an overdraft, which was not
utilised at 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 of the term of the facility.
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.
19. Called up share capital
The consolidated share capital at 3 January 2021 has been restated as if the
entities had been combined at the earliest reporting date presented and
therefore represents the share capital of Mexican Grill Limited adjusted for
the share capital issued for the purposes of the business combination.
The issued share capital of the Company on incorporation was one ordinary
share of £0.01 (the "Subscriber Share"). There have been the following
changes in the Company share capital since incorporation:
· on 10 September 2021: (i) 6,462,600 ordinary shares of nominal value
£0.01 each, (ii) 2,196,000 A ordinary shares of nominal value £0.01 each,
(iii) 10,799,400 A preference shares of nominal value £0.01 each and (iv)
16,443,600 B preference shares of nominal value of £0.01 each were allotted;
· also on 10 September 2021 simultaneously with the allotment of the
shares referred to above, the Subscriber Share was cancelled. Immediately
following this, the total statement of capital of the Company was 6,462,600
ordinary shares, 2,196,000 A ordinary shares, 10,799,400 A preference shares
and 16,443,600 B preference shares with an aggregate nominal value of
£359,016;
· on 29 September 2021 the 2,196,000 A ordinary shares, 10,799,400 A
preference shares and the 16,443,600 B preference shares were re-designated as
29,439,000 ordinary shares of nominal value £0.01 each, with the resulting
total share capital being 35,901,600 ordinary shares with an aggregate nominal
value of £359,016; and
· on 8 October 2021 (immediately following admission to AIM), a
further 2,762,431 shares were allotted, bringing the total number of ordinary
shares to 38,664,031.
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.
20. Reserves
Share premium account
The share premium account records the amount above the nominal value received
for shares sold.
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.
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.
Retained earnings
The accumulated net profits and losses of the Group.
21. Analysis of changes in net debt
The movements in net debt are presented below along with a reconciliation to
the financing activities in the consolidated cash flow statement.
Bank loans Lease liabilities Total financing liabilities Cash and cash equivalents Net debt
£ £ £ £ £
At 3 January 2021 12,426,235 31,371,657 43,797,894 (10,086,759) 33,711,135
Cash flow (9,688,748) (3,932,971) (13,621,719) 433,587 (13,188,132)
Additions to lease liabilities - 3,228,655 3,228,655 - 3,228,655
Finance expense 377,757 994,747 1,372,504 - 1,372,504
At 2 January 2022 2,911,941 31,662,090 34,574,031 (9,653,172) 24,920,859
22. Investments in subsidiaries
The subsidiaries of the Tortilla Mexican Grill plc, all of which have been
included in the consolidated financial information and comprise the Group, are
as follows:
Name of subsidiary Country of incorporation Proportion of ownership interest and voting rights held by the Group Principal activity
Mexican Grill Ltd United Kingdom 100% Operation of restaurants
Mexican Grill International Franchise Ltd United Kingdom 100% International franchising
California Grill Ltd United Kingdom 100% Holding leases
The registered address for all three subsidiaries is 1st Floor Evelyn House,
142 New Cavendish Street, London, United Kingdom, W1W 6YF.
23. Related party transactions
At At
2 January 2022 3 January 2021
£ £
Richard Morris - 68,400
Andy Naylor - 28,500
- 96,900
During the 52 weeks ending 2 January 2022, loans owed by Directors Richard
Morris and Andy Naylor were repaid in full. No interest was charged on this
loan during this period.
Mexican Grill Ltd was charged monitoring fees of £35,000 for the 52 weeks
ended 2 January 2022 (53 weeks ended 3 January 2021: £6,250) 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. This is set at £30,000 for 2022 onwards.
24. Ultimate controlling party
The Directors believe that there is no ultimate controlling party of the
Group.
25. Capital commitments: Group and Company
The Group had capital commitments of £65,050 at 2 January 2022 (3 January
2021: £nil).
26. Post-balance sheet events: Group and Company
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.
27. IFRS comparison to UK GAAP
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 and has
restated its results for comparative period as if the Group had always applied
the new standard.
Pre-IFRS 16 IFRS 16 IFRS Pre-IFRS 16 IFRS 16 IFRS
52 weeks ended adjustments 52 weeks ended 53 weeks ended adjustments 53 weeks ended
2 January 2022 2 January 2022 3 January 2021 3 January 2021
£ £ £ £ £ £
Revenue 48,075,399 - 48,075,399 26,832,846 - 26,832,846
Cost of sales (9,797,235) - (9,797,235) (6,054,932) - (6,054,932)
Gross profit 38,278,164 - 38,278,164 20,777,914 - 20,777,914
Other Operating Income 1,877,806 - 1,877,806 3,489,162 - 3,489,162
Administrative expenses (36,461,586) (60,229) (36,521,815) (24,806,958) 70,607 (24,736,351)
Profit/(loss) from operations 3,694,384 (60,229) 3,634,155 (539,882) 70,607 (469,275)
Adjusted EBITDA 8,740,576 3,466,784 12,207,360 2,361,333 3,376,630 5,737,963
Pre-opening costs (165,850) 39,097 (126,753) (171,063) 92,285 (78,778)
Share based payments (90,507) - (90,507) - - -
Depreciation and amortisation (2,688,928) (3,566,110) (6,255,038) (2,397,870) (3,398,308) (5,796,178)
Exceptional items (1,856,268) - (1,856,268) (272,182) - (272,182)
Non-trading costs (244,639) - (244,639) (60,100) - (60,100)
3,694,384 (60,229) 3,634,155 (539,882) 70,607 (469,275)
Finance income 613 - 613 111,791 - 111,791
Finance expense (377,757) (994,747) (1,372,504) (339,959) (995,789) (1,335,748)
Profit/(loss) before tax 3,317,240 (1,054,976) 2,262,264 (768,050) (925,182) (1,693,232)
Tax charge (900,690) - (900,690) - - -
Profit/(loss) for the period and comprehensive income attributable to equity 2,416,550 (1,054,976) 1,361,574 (768,050) (925,182) (1,693,232)
holders of the parent company
Pre-IFRS 16 IFRS 16 IFRS Pre-IFRS 16 IFRS 16 IFRS
52 weeks ended adjustments 52 weeks ended 53 weeks ended adjustments 53 weeks ended
2 January 2022 2 January 2022 3 January 2021 3 January 2021
£ £ £ £ £ £
Non-current assets
Right-of-use assets - 24,939,614 24,939,614 - 25,324,841 25,324,841
Property, plant and equipment 8,719,167 545,000 9,264,167 9,189,916 (77,773) 9,112,143
Total non-current assets 8,719,167 25,484,614 34,203,781 9,189,916 25,247,068 34,436,984
Current assets
Inventories 326,108 - 326,108 239,782 - 239,782
Trade and other receivables 2,308,070 (419,368) 1,888,702 2,496,137 (597,842) 1,898,295
Cash and cash equivalents 9,653,172 - 9,653,172 10,086,759 - 10,086,759
Total current assets 12,287,350 (419,368) 11,867,982 12,822,678 (597,842) 12,224,836
Total assets 21,006,517 25,065,246 46,071,763 22,012,594 24,649,226 46,661,820
Current liabilities
Trade and other payables 9,220,394 (2,490,529) 6,729,865 8,580,798 (3,671,094) 4,909,704
Lease liabilities - 5,830,987 5,830,987 - 7,176,104 7,176,104
Loans and borrowings - - - 1,000,000 - 1,000,000
Corporation tax liability 900,690 - 900,690 - - -
Total current liabilities 10,121,084 3,340,458 13,461,542 9,580,798 3,505,010 13,085,808
Non-current liabilities
Lease liabilities - 25,831,103 25,831,103 - 24,195,555 24,195,555
Loans and borrowings 2,911,941 - 2,911,941 11,426,235 - 11,426,235
Total non-current liabilities 2,911,941 25,831,103 28,743,044 11,426,235 24,195,555 35,621,790
Total liabilities 13,033,025 29,171,561 42,204,586 21,007,033 27,700,565 48,707,598
Net assets / (liabilities) 7,973,492 (4,106,315) 3,867,177 1,005,561 (3,051,339) (2,045,778)
Equity attributable to equity holders of the company
Called up share capital 386,640 - 386,640 359,016 - 359,016
Share premium account 4,433,250 - 4,433,250 - - -
Share merger reserve 4,793,170 - 4,793,170 4,793,170 - 4,793,170
Share based payment reserve 90,507 - 90,507 - - -
Retained earnings (1,730,075) (4,106,315) (5,836,390) (4,146,625) (3,051,339) (7,197,964)
Total equity 7,973,492 (4,106,315) 3,867,177 1,005,561 (3,051,339) (2,045,778)
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