REG - Tortilla Mexcn.Grill - Interim Results
03/10/2022 07:00
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RNS Number : 4347B Tortilla Mexican Grill PLC 03 October 2022
3 October 2022
Tortilla Mexican Grill plc
("Tortilla", "the Group")
Interim Results
Tortilla demand and market conditions lead to acceleration in pipeline
Tortilla Mexican Grill plc, the largest and most successful fast-casual
Mexican restaurant business in the UK, today announces its unaudited interim
results for the 26 weeks ended 3 July 2022 ("H1 FY22", "the Period"). All
numbers are shown on a IFRS basis unless otherwise stated.
Financial highlights
· Revenue increased by 30% to £26.9m (H1 FY21: £20.8m)
· Like-for-like ("LFL") revenue growth(2) of +19% (13% higher than CGA
Peach(3) of benchmark: +6%)
· Adjusted EBITDA (pre-IFRS 16)(1) of £2.5m (H1 FY21: £4.9m)
· Profit before tax of £0.3m (H1 FY21: £2.6m)
· Strong balance sheet with net cash(4) of £3.2m at Period end (H1
FY21: £0.9m) and a further £7m of liquidity available under revolving credit
facility
Operational and strategic highlights
· Strategic acquisition of Chilango completed for consideration of
£2.75m(5), strengthening our position as the leading fast-casual Mexican
chain in the UK
· Great progress on new store roll-out with five sites opened across
the UK, and one delivery kitchen, taking the total number of Group sites,
including eight acquired Chilango sites, to 84 at the Period end
· Five further sites are planned to open in H2 FY22, with new store
roll-out expected to increase to 12-15 per annum from FY23
· Expanded and solidified partnerships:
o Four university sites opened through franchise partnership with Compass
Group plc
o One further site opened with SSP Group plc in Bristol Airport bringing the
total to four, with multiple record sales weeks achieved at Gatwick Airport
over the summer months
· London's recovery continues unabated, with sales trending at 98% of
pre-Covid FY19 levels across our Zone 1 central London sites, giving us great
confidence in the Chilango acquisition
(1) defined as statutory operating profit before interest, tax, depreciation
and amortisation (before application of IFRS 16 and excluding exceptional
costs) and reflects the underlying trading performance of the Group. The
reconciliation to profit from operations is presented in the financial review.
(2) defined as the percentage change in like-for-like sales compared to H1
FY19 and so it excludes periods of non-trading.
(3) defined as the average of the data reported for restaurants by CGA Peach
for the period.
(4) defined as net cash before lease liabilities arising from application of
IFRS 16.
(5) comprising an initial cash outflow of £2.5m plus £0.25m of contingent
consideration.
Current Trading & Outlook
Since Period end, we have commenced a non-exclusive delivery trading
arrangement to enable us to work with multiple delivery partners. Our new
loyalty scheme, "Tortilla Club", was launched which has almost doubled our
loyalty customer database and driven a 29% increase in visitation frequency
amongst loyalty customers. We have converted five of the eight Chilango sites
to trade under the Tortilla brand and opened a further two Tortilla sites in
Lincoln and Leicester. We also published our first Environment Social
Governance (ESG) Report (for 2021/22).
We will open ten sites in the current year and will increase our new site
opening rate to 12-15 sites per year, starting in FY23, to take advantage of:
(1) the depressed commercial property market; (2) our excellent performance
outside of London; and (3) the considerable new site "white space" opportunity
identified in a recent report produced by CACI, a leading business
consultancy.
Sales over the summer period were more challenging than anticipated, due to a
combination of train strikes, the heatwave, and pent-up consumer demand for
overseas holidays. We estimate that the impact of the first two factors is
c£0.25m in lost sales. Despite these challenges, our LFL (vs. FY19) sales
growth remains strong and materially above the industry CGA benchmark:
· July: 13.2% (CGA benchmark: 1.3%)
· August: 12.3% (CGA benchmark: 2.8%)
· September: 16.6% (reported after week 3 of 5)
We remain very encouraged by the underlying sales performance of the business,
with the LFLs in September already close to pre-summer levels. Our new loyalty
scheme presents great potential to drive customer visit frequency.
Inflationary cost pressures remain the biggest challenge across the industry.
Whilst we have taken decisive steps to control the factors we are able to and
have successfully mitigated cost increases where possible, we estimate these
will result in a three percentage points reduction in gross margin for FY22
(approximately £1.8 million). This is driven primarily by a c.40% increase in
protein costs, which account for approximately one third of our cost of goods
sold. We also expect a further £0.5m adverse full year impact from increased
utility costs.
These industry headwinds will have a material impact on profitability in H2,
and it is prudent to assume that inflationary cost pressures will continue
beyond FY22. We have several initiatives and strategies in place to help us to
continue to partially mitigate this impact and, in particular, we see
opportunities in technology around labour and forecasting and are also
exploring ways of driving increased efficiencies our supply chain.
We remain cautious over significantly increasing our menu prices and/or
resorting to heavy discounting. We believe that it is important to resist
making short term gains, as history tells us this is a quick way of
undermining the offer and causing customer dissatisfaction. Our value for
money proposition is extremely important in the longer term and this must be
protected.
We are in a strong financial position with strong top-line momentum
underpinned by our very relevant product proposition and growth strategy.
Whilst mindful of the near-term sector-wide challenges, we continue to ensure
we do not lose focus on delivering our exciting, long-term and sustainable
growth opportunities.
Richard Morris, CEO of Tortilla, commented:
"Against a backdrop of challenging macroeconomic conditions, I am really proud
to report that we have continued to make great progress against our ambitious
growth plans laid out at our IPO last year. Our strong top-line growth was
significantly ahead of the broader market, again reflecting Tortilla's growing
reputation for great value, high quality food.
"We continue to focus on our plans for strategic expansion, accelerating our
new site roll-out to locations across the UK through both our acquisition of
Chilango and organic roll-out programme. We are pleased to be ahead of our
expansion targets set out at IPO, adding 18 sites this year, and excited by
the opportunity to increase organic roll-out to 12-15 sites per annum from
FY23.
"Times remain tough across the industry at large reflecting the extent of
recent cost pressures. However, we remain confident in our ability to
successfully navigate our way through these industry-wide challenges whilst
continuing to deliver against our ambitious growth strategy. Our long-term
progress will continue to be underpinned by a firm focus on consistent
operational excellence, ensuring a great value proposition, and the continued
broad appeal of our offer. The Board is highly confident in achieving the
Group's exciting long-term growth potential."
This announcement contains inside information for the purposes of Article 7 of
the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law
by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is
disclosed in accordance with the Company's obligations under Article 17 of
MAR.
ENQUIRIES
Tortilla Mexican Grill PLC Via Hudson Sandler
Richard Morris, CEO
Andy Naylor, CFO
Liberum Capital Limited (Nominated Adviser, Sole Broker) Tel: 020 3100 2222
Andrew Godber
Edward Thomas
Nikhil Varghese
Hudson Sandler (Public Relations) Tel: 020 7796 4133
Alex Brennan tortilla@hudsonsandler.com (mailto:tortilla@hudsonsandler.com)
Wendy Baker
Lucy Wollam
Charlotte Cobb
For further information visit tortillagroup.co.uk
(https://tortillagroup.co.uk/)
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 84 sites worldwide as of 3 July 2022,
comprising 68 sites in the UK operated by the Group, four sites franchised to
SSP Group in the UK, four sites franchised to Compass Group UK & Ireland
and eight 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.
BUSINESS REVIEW
Revenue increased by 30% to £26.9m (H1 FY21: £20.8m), driven by fewer lost
trading weeks due to the Covid-19 pandemic when compared to the prior year,
the addition of six new stores to our estate, and continuous sales growth
across our sites. Like-for-like revenue increased by 19%, which is 13
percentage points higher than the CGA Peach tracker performance and reflects
the quality and relevance of the Tortilla offer. Whilst it has certainly been
a testing six months in the hospitality sector, our teams across the UK
continue to work incredibly hard to deliver consistently strong performances
for the business.
It has been great to see consumers returning to our stores in such numbers,
with the strategic marketing investment made during and since the pandemic
showing clear return on investment. The launch of our "Tortilla Club" has
increased customer visitation by 29%, which has been bolstered by our
successful social media strategy to enhance brand awareness and encourage
customers to visit our stores. We have acquired 78k new loyalty sign ups in
the last twelve months which represents an increase of 58%. We expect that
this will continue to help drive top-line performance in the second half and
beyond, as the number of loyalty customers increases.
In H1 FY22 we delivered a stronger performance than ever outside of London,
with average adjusted site EBITDA (pre-IFRS 16) at these sites being £20k
higher compared to our sites located in London. This gives us great optimism
about the "white space" opportunity across the UK, as well as in London, as we
continue our store roll-out strategy.
Chilango acquisition
Our strategic acquisition of Chilango in May has strengthened the Group's
position as the leading fast-casual Mexican restaurant group in the UK. The
acquisition has supported the Group's expansion plans by adding eight new
sites to the Group, primarily located in prime central London locations, and
complementing our organic site opening pipeline for FY22 and FY23 with most
planned sites situated outside London.
We have converted five of the acquired sites to Tortilla branded stores to
leverage the strength of our brand and customer proposition. The three
remaining stores, Islington, Chancery Lane and Brewer Street, will remain
trading as Chilango. We have also retained one delivery kitchen in Dulwich
which will remain trading under the Chilango brand. Lastly, we will trial the
use of the Chilango brand as a delivery-only offering, served from our
Tortilla delivery kitchens, with a focus on protein/keto boxes and a
specialism in alternative vegan products.
Roll-out strategy
We continued to make good progress with our new store roll-out strategy during
the Period, with six sites (five company full stores plus one delivery
kitchen) opening across the UK, taking the total number of Group sites,
including the eight acquired sites, to 84 UK sites at the Period end.
Post Period end, we have opened two further sites in Lincoln and Leicester,
and we expect to open three further sites in Coventry, Canterbury and Durham,
taking the total to 11 for FY22 (10 traditional stores plus one delivery
kitchen). Including the eight Chilango acquired sites, this brings the grand
total for FY22 to 19. Post Period end, we closed several delivery kitchens
which leaves us with four of these units trading as of 30 September 2022.
In addition to our own store roll-out, during the Period we continued to
develop our successful partnerships with the opening of a further SSP
franchise site in Bristol Airport as well as four Tortilla units at university
campuses through our franchise partnership with Compass Group plc. The travel
hub locations have performed particularly strongly and proves our suitability
in these busy locations.
Our property pipeline for FY23 is extremely healthy as we look to increase our
new site openings to 12-15 per annum and continue to take advantage of
favourable rental market conditions. Several sites have legals exchanged as
well as others that have heads of terms already agreed. We expect to reach our
100-site milestone before the end of the next financial year (FY23), ahead of
our previous expectations.
It is clearer than ever that new store openings are met with a fantastic
reaction from consumers. Taking the average weekly sales of the FY21-22
openings, the sales performance of these units is already 10% higher than the
level required to hit the 30% ROCE threshold. All our openings in the last two
years have been profitable in the first month of trading. Our performance and
momentum across all sites is underpinned by the growing interest in Mexican
food and our strong value-for-money proposition, which is also helping to
shorten the maturation period for new store openings.
We are also encouraged by the resurgence of our central London sites, which
are trading at 98% of their pre-Covid levels and this gives us further
confidence in the potential of our Chilango acquisition.
Mitigating actions
FY22 has seen levels of inflation unprecedented during recent decades,
stemming from the combined impact of the war in Ukraine and the legacy of the
pandemic. Cost increases have been seen most notably in utilities, as well as
the cost of meat, with the inevitable subsequent material impact on
profitability. While we are fortunate that the size of our utility bill is
relatively small, we have nonetheless worked tirelessly and diligently to
offset the impact of inflation as much as possible, and for many months now,
and we have done this without compromising on our commitment to outstanding
value and quality for our customers.
To further mitigate these cost increases, we have interrogated every aspect of
our supply chain, applied comparatively modest pricing, made recipe
adjustments where sensible, and taken the bold move of switching to a
non-exclusive delivery trading arrangement. We started our partnership with
Uber Eats in July to sit alongside our existing strong partnership with
Deliveroo, helping to support our delivery revenue growth. While trading on
more than one delivery platform, and without an exclusive arrangement, has a
dilutive impact on the margin generated through delivery sales, it has helped
to bolster our performance.
Whilst the challenges of inflation and the increased cost-of-living are set to
persist in the second half and into 2023, we remain convinced that our
competitive and great value price points and relevant, customisable offer puts
us in a strong position to continue to grow and succeed.
Board and people
We have an experienced senior management team who remain very passionate about
the brand and implementing our growth strategy. We are excited to have added
an experienced People Director to the business and, post Period end, a new
Non-Executive Director has joined the Board. Francesca Tiritiello brings with
her many years of global restaurant brand experience as well as significant
franchising expertise in the UK and Europe.
Environmental, Social & Governance ("ESG")
We are proud to have published our first ESG report post Period end, in
September, which sets out the Group's performance for 2021 and the first six
months of 2022, as well as our sustainability commitments and vision for the
future. Highlights of our ESG performance over the past 18 months include:
maintaining zero waste to landfill status; procuring 100% renewable
electricity and offsetting gas; turning all waste cooking oil into bio-diesel;
launching a partnership with food waste organisation Too Good To Go with all
raised funds going to ESG initiatives; launching a local burrito donations
scheme; driving wellbeing and career progression through the Tortilla
apprenticeship scheme; and raising more than £37,000 for charities over the
past year.
Going forward our commitments are based around five focus areas across the
three core pillars of supporting the environment, our people, and our
society/communities. These focus areas are aligned to the UN's SDGs, with
commitments including developing a net zero emissions roadmap, verified by the
Science Based Targets Initiative (SBTi), and implementing strategies to reach
this; reducing waste; improving data capture across all staff and implementing
further training initiatives to aid retention and support long-term career
progression; and, finally, to strengthen governance around ESG including
through becoming ISO 27001 certified by 2023.
The pandemic and the months since have shown the importance of building a
business that is resilient and sustainable in its operations, and our
customers are expecting more from us than ever before. ESG will be a central
part of our business operations moving forward, and we look forward to
reporting on our progress in the coming years.
Our full ESG impact report is available at tortillagroup.co.uk
FINANCIAL REVIEW
We are pleased with our results for the first half of FY22, having
outperformed our planned progress on our new store opening plan and
successfully acquired one of our key competitors, Chilango.
Revenue
Revenue increased by 30% to £26.9m (H1 FY21: £20.8m), driven by the addition
of six new sites, the continued underlying sales growth of the estate and less
lost trading weeks due to the Covid-19 pandemic. Our mature estate continues
to trade strongly with LFL sales growth of 19% compared to H1 FY19. This
compares very favourably to the CGA Peach benchmark performance reported for
our peers of just 6%.
Gross profit margin
Gross profit margin decreased by 3.6% to 77.0% (H1 FY21: 80.6%). The main
driver behind the change was a 2.2% expected impact from the increase in VAT
rate, which was 5% in H1 FY21 compared to 12.5% and then 20% in Q1 FY22 and Q2
FY22 respectively. The remaining variance arose due to underlying cost
inflation on proteins arising from the war in Ukraine and higher share of
in-store sales which are priced c.20-35% lower than those sold through our
delivery platforms. The delivery commission costs are recorded within
administrative expenses and therefore the overall gross margin from these two
channels is comparable.
Administrative expenses
Administrative expenses increased by 31% to £20.0m compared to H1 FY21.
Stated as a percentage of revenue, administrative expenses increased by 0.6%,
which was entirely attributable to the impact of VAT as, once this is
normalised, administrative expenses decreased by 7.6%. This improvement is due
to the cost dilution arising from the growth in revenues, scale economies and
efficiencies. Notable items within administrative expenses for H1 FY22 include
£0.2m of costs incurred for the Chilango acquisition plus associated
redundancy costs of £0.1m.
Adjusted EBITDA (pre-IFRS 16)
Adjusted EBITDA (pre-IFRS 16) is a non-GAAP measure. A reconciliation of this
measure compared to profit from operations is as follows:
H1 FY22 H1 FY21
£m £m
Adjusted EBITDA (pre-IFRS 16) 2.5 4.9
Pre-opening costs (0.3) (0.1)
Share option expense (0.2) -
Depreciation and amortisation (1.5) (1.3)
Exceptional items (0.3) (0.1)
IFRS 16 adjustment1 0.7 (0.1)
Profit from operations 0.9 3.3
(1) IFRS 16 has an impact on EBITDA, with the removal of rent from the
calculation. For Adjusted EBITDA pre-IFRS 16, it is deducted for comparative
purposes, offset by adjustments arising from lease
modifications.
Adjusted EBITDA (pre-IFRS 16) was £2.5m (H1 FY21: £4.9m). The £2.4m
decrease is due to a £3.6m reduction in Government support through changes in
VAT, business rates relief and restart grants, offset by a £1.2m underlying
improvement driven by the growth of the Group's existing sites and the
addition of new restaurants to the portfolio.
Share-based payments
Share-based payment expenses of £0.2m were recognised in the Period (H1 FY21:
nil) relating to the Group's Long Term Incentive Plan ("LTIP") created as part
of the Group's admission to the Alternative Investment Market ("AIM").
Finance expense
Finance expense of £0.7m reflects £0.6m of interest charged in relation to
Right of Use assets and £0.1m of interest for the debt facility that the
Group has in place.
Cash flow and net cash
The Group closed the Period with a net cash position of £3.2m. Drawn debt
remains unchanged from the end of the FY21 financial year at £3.0m. A
reconciliation of net cash between the start and end of the Period is as
follows:
Opening balance £6.7m
Adjusted cash generated from operations (pre-IFRS 16) £3.1m
Consideration paid for acquisition of Chilango (£2.5m)
One-off fees incurred for acquisition of Chilango (£0.2m)
Cash arising from acquisition of Chilango £0.1m
Capital expenditure for new stores (£2.0m)
Maintenance capital expenditure (£0.8m)
Payment of FY21 rent (£1.2m)
Closing balance £3.2m
The Adjusted cash generated from operations (pre-IFRS 16), which represents
the Group's underlying cash flow generation, remains very healthy at £3.2m
which is more than sufficient to cover the Group's growth and maintenance
capital expenditure of £2.8m. This provides the Group with a strong platform
to continue funding the expansion of future sites.
The acquisition of Chilango resulted in an initial cash outflow of £2.5m
against a total consideration of £2.75m. The remaining £0.25m of
consideration is contingent and will be paid upon achieving certain
conditions. The £2.5m initial cash outflow included £1.0m which was paid to
Chilango for working capital needs.
The Group also paid £1.2m of historical rent liabilities in H1 FY22 upon
agreeing terms with a small number of landlords in regard to Covid
concessions. At the balance sheet date there are no outstanding historical
rent liabilities.
Dividend
The Board did not recommend an interim dividend for FY22. The Group's capital
will be focused on growth over the coming years with the dividend policy
subject to re-assessment going forward.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 3 July 2022
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
Note £ £
Revenue 26,898,368 20,751,269
Cost of sales (6,184,070) (4,026,315)
Gross profit 20,714,298 16,724,954
Other operating income 3 211,310 1,876,212
Administrative expenses (20,004,021) (15,308,013)
Profit from operations 4 921,587 3,293,153
Finance income 5 276 563
Finance expense 5 (657,811) (660,269)
Profit before tax 264,052 2,633,447
Tax charge (107,531) (340,318)
Profit for the period and comprehensive income attributable to equity holders 156,521 2,293,129
of the parent company
Earnings per share for profit attributable to the owners of the parent during
the period
Basic and diluted (pence) 6 0.4 638.7
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
At 3 July 2022
Unaudited Unaudited Audited
At At At
3 July 2022
4 July 2021
2 January 2022
Note £ £ £
Non-current assets
Intangible assets 7 2,604,279 - -
Right-of-use assets 8 29,603,290 25,004,186 24,939,614
Property, plant and equipment 9 10,933,689 9,417,826 9,264,167
Total non-current assets 43,141,258 34,422,012 34,203,781
Current assets
Inventories 442,693 266,335 326,108
Trade and other receivables 10 2,369,919 1,890,278 1,888,702
Cash and cash equivalents 6,083,998 12,871,432 9,653,172
Total current assets 8,896,610 15,028,045 11,867,982
Total assets 52,037,868 49,450,057 46,071,763
Current liabilities
Trade and other payables 11 8,982,415 5,841,187 6,729,865
Lease liabilities 8 5,329,676 5,801,684 5,830,987
Loans and borrowings - 1,250,000 -
Corporation tax liability 1,008,221 340,318 900,690
Total current liabilities 15,320,312 13,233,189 13,461,542
Non-current liabilities
Lease liabilities 8 29,591,636 25,269,599 25,831,103
Loans and borrowings 2,921,208 10,699,918 2,911,941
Total non-current liabilities 32,512,844 35,969,517 28,743,044
Total liabilities 47,833,156 49,202,706 42,204,586
Net assets 4,204,712 247,351 3,867,177
Equity attributable to equity holders of the company
Called up share capital 386,640 359,016 386,640
Share premium account 4,433,250 - 4,433,250
Merger reserve 4,793,170 4,793,170 4,793,170
Share based payment reserve 271,521 - 90,507
Retained earnings (5,679,869) (4,904,835) (5,836,390)
Total equity 4,204,712 247,351 3,867,177
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the period ended 3 July 2022
Share capital Share premium Merger reserve Share-based payment reserve Retained earnings Total
£ £ £ £ £ £
Equity at 3 January 2021 359,016 - 4,793,170 - (7,197,964) (2,045,778)
Profit for the period - - - - 2,293,129 2,293,129
Equity at 4 July 2021 359,016 - 4,793,170 - (4,904,835) 247,351
Loss for the period - - - - (931,555) (931,555)
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
Equity at 2 January 2022 386,640 4,433,250 4,793,170 90,507 (5,836,390) 3,867,177
Profit for the period - - - - 156,521 156,521
Share-based payments - - - 181,014 - 181,014
Equity at 3 July 2022 386,640 4,433,250 4,793,170 271,521 (5,679,869) 4,204,712
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 3 July 2022
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
Note £ £
Operating activities
Profit after tax 156,521 2,293,129
Adjustments for:
Share based payments 181,014 -
Net finance expense 5 79,405 167,616
Finance cost on lease liabilities 5 578,130 492,090
Corporation tax charge 107,531 340,318
Amortisation of intangible assets 7 2,275 -
Loss on disposal of intangible assets 7 6,825 -
Depreciation of right to use assets 8 1,502,348 1,550,168
Impairment of right to use assets 8 - 99,868
Depreciation of property, plant and equipment 9 1,420,657 1,229,076
Loss on disposal of property, plant and equipment 9 6,834 -
Increase in inventories (64,788) (26,553)
Decrease in trade and other receivables 296,992 8,017
Increase in trade and other payables 358,064 879,349
Cash generated from operations 4,631,808 7,033,078
Investing activities
Interest received 5 276 563
Purchase of property, plant and equipment 9 (2,958,549) (1,534,759)
Acquisitions, net of cash acquired 12 (1,687,365) -
Net cash used by investing activities (4,645,638) (1,534,196)
Financing activities
Payments made in respect of lease liabilities 8 (3,484,931) (2,121,846)
Interest paid (70,413) (92,363)
Repayment of loans - (500,000)
Net cash used by financing activities (3,555,344) (2,714,209)
Net (decrease)/increase in cash and cash equivalents (3,569,174) 2,784,673
Cash and cash equivalents at the beginning of period 9,653,172 10,086,759
Cash and cash equivalents at the end of period 6,083,998 12,871,432
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.
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 and under the Chilango brand in the United Kingdom.
2. Accounting policies
Basis of preparation
The consolidated interim financial information has been prepared in accordance
with International Financial Reporting Standards, International Accounting
Standards and Interpretations (collectively IFRSs), as adopted by UK
international accounting standards.
The Group's Annual Report and Accounts for the period ended 1 January 2023 are
expected to be prepared under IFRS.
The comparative financial information for the period ended 2 January 2022 in
this interim report does not constitute statutory accounts for that period
under 435 of the Companies Act 2006.
Statutory accounts for the period ended 2 January 2022 have been delivered to
the Registrar of Companies.
The auditors' report on the statutory accounts for 2 January 2022 was
unqualified, did not draw attention to any matters by way of emphasis, and did
not contain a statement under 498(2) or 498(3) of the Companies Act 2006.
Significant accounting policies
The consolidated interim financial information has been prepared in accordance
with accounting policies that are consistent with the Group's Annual Report
and Accounts for the period ended 2 January 2022 which is published on the
Tortilla website, located at www.tortillagroup.co.uk. At the date of
authorisation of this financial information, certain new standards, amendments
and interpretations to existing standards applicable to the Group have been
published but are not yet effective and have not been adopted early by the
Group. The impact of these standards is not expected to be material.
In adopting the going concern basis for preparing these financial statements,
the Directors have considered the business model and strategies, as well as
taking into account the current cash position and facilities.
Based on the Group's cash flow forecasts, the Directors are satisfied that the
Group will be able to operate within the level of its current facilities for
the foreseeable future, a period of at least twelve months from the date of
this report. In making this assessment, the Directors have made a specific
analysis of the impact of both the inflationary pressures currently affecting
the industry as well as consumers, and the impact of a potential recession.
Accordingly, the Directors consider it appropriate for the Group to adopt the
going concern basis in preparing these financial statements.
3. Other operating income
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
£ £
CJRS income(1) - 491,281
Other government grants(2) 211,310 1,384,931
211,310 1,876,212
( )
(1) Coronavirus Job Retention scheme
(2) Includes Retail Leisure Hospitality Grants, Local Restriction Support
Grants, Restart Grants and Omicron Grants
4. Profit from operations
Profit from operations is stated after charging:
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
£ £
Depreciation & amortisation 2,923,005 2,779,244
Impairment of right-of-use assets - 99,868
Loss on disposal of fixed and intangible assets 13,660 -
Variable lease payments 548,421 136,775
Inventories - amounts charged as an expense 6,184,070 4,026,315
Staff costs 8,810,841 6,303,247
Share option expense 181,014 -
Pre-opening costs 287,580 45,044
Exceptional items(1) 306,866 106,464
Quilvest monitoring fees(2) - 23,629
Bank arrangement fee amortisation 9,270 23,682
(1) Exceptional items in 2022 include costs relating to the Chilango
acquisition.
(2) Quilvest monitoring fees were payable prior to the Group's admission to
AIM.
Pre-opening costs
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
£ £
Pre-opening costs 287,580 45,044
Number of site openings in period 6 3
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.
5. Finance income and expenses
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
£ £
Finance income
Bank interest income 276 563
Finance expense
Bank loan interest expense 79,681 168,180
Finance cost on lease liabilities 578,130 492,090
657,811 660,270
6. Earnings per share
Basic earnings per share is calculated by dividing the profit attributable to
equity shareholders by the weighted average number of shares outstanding
during the period.
Unaudited Unaudited
26 weeks ended 26 weeks ended
3 July 2022 4 July 2021
£ £
Profit
Profit used in calculating basic and diluted profit 156,521 2,293,129
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 per share (p) 0.4 638.7
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.
7. Intangible assets
Intangible Assets £
At 2 January 2022 -
Goodwill arising on consolidation (note a) 2,594,376
Copyrights and computer software (note b) 9,903
At 3 July 2022 (unaudited) 2,604,279
a) Goodwill arising on consolidation £
At 2 January 2022 -
Acquisition of Chilango Ltd 2,594,376
At 3 July 2022 (unaudited) 2,594,376
b) Copyrights and computer software Copyrights Computer Software
£ £
Cost
At 2 January 2022 - -
Arising from acquisition 15,500 9,100
Disposals - (9,100)
At 3 July 2022 (unaudited) 15,500 -
Amortisation
At 2 January 2022 - -
Amortisation charge (5,597) (2,275)
Disposals - 2,275
At 3 July 2022 (unaudited) (5,597) -
Net book value
At 3 July 2022 (unaudited) 9,903 -
8. 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.
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. Subsequently rates
have been used on a lease-by-lease basis for the half-year to 3 July 2022,
which reflect the increasing risk-free rate during this period.
Right-of-use assets £ Lease liabilities £
At 3 January 2021 25,324,841 At 3 January 2021 (31,371,659)
Additions 2,232,758 Additions (2,232,758)
Depreciation (1,550,168) Interest expense (492,090)
Impairment (99,868) Lease payments 2,121,846
Disposals (903,377) Disposals 903,378
At 4 July 2021 (unaudited) 25,004,186 At 4 July 2021 (unaudited) (31,071,283)
At 2 January 2022 24,939,614 At 2 January 2022 (31,662,090)
Additions 4,491,185 Additions (4,491,185)
Acquisition 2,671,192 Acquisition (2,671,192)
Depreciation (1,502,348) Interest expense (578,130)
Impairment - Lease payments 3,484,931
Disposals (996,353) Disposals 996,354
At 3 July 2022 (unaudited) 29,603,290 At 3 July 2022 (unaudited) (34,921,312)
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
3 July 2022 5,329,676 4,997,769 11,709,389 12,884,478 29,591,636 34,921,312
4 July 2021 5,801,684 3,936,438 9,539,922 11,793,239 25,269,599 31,071,283
9. Property, plant and equipment
Furniture, fittings
Leasehold Plant and
Improvements machinery and equipment Total
£ £ £ £
Net book value
At 3 January 2021 7,104,066 1,028,883 979,194 9,112,143
Cost
At 3 January 2021 13,409,952 3,720,236 3,079,963 20,210,151
Additions 591,470 201,429 741,860 1,534,759
At 4 July 2021 (unaudited) 14,001,422 3,921,665 3,821,823 21,744,910
Accumulated Depreciation
At 3 January 2021 (6,305,886) (2,691,353) (2,100,769) (11,098,008)
Charge for year (585,160) (335,262) (308,654) (1,229,076)
At 4 July 2021 (unaudited) (6,891,046) (3,026,615) (2,409,423) (12,327,084)
Net book value
At 4 July 2021 (unaudited) 7,110,376 895,050 1,412,400 9,417,826
Net book value
At 2 January 2022 6,758,965 844,093 1,661,109 9,264,167
Cost
At 2 January 2022 14,295,429 3,621,556 3,671,580 21,588,565
Arising from acquisition 104,019 43,047 194,143 341,209
Additions 1,069,041 667,277 1,222,231 2,958,549
Disposals - (13,470) (806) (14,276)
At 3 July 2022 (unaudited) 15,468,489 4,318,410 5,087,148 24,874,047
Accumulated Depreciation
At 2 January 2022 (7,536,464) (2,777,463) (2,010,471) (12,324,398)
Arising from acquisition (24,191) (16,940) (161,614) (202,745)
Charge for year (602,134) (273,625) (544,898) (1,420,657)
On disposals - 6,968 474 7,442
At 3 July 2022 (unaudited) (8,162,789) (3,061,060) (2,716,509) (13,940,358)
Net book value
At 3 July 2022 (unaudited) 7,305,700 1,257,350 2,370,639 10,933,689
10. Trade and other receivables
Unaudited Unaudited
At At
3 July 2022 4 July 2021
£ £
Trade debtors 678,955 426,347
Other debtors 873,759 792,066
Prepayments and accrued income 817,205 671,865
2,369,919 1,890,278
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.
11. Trade and other payables
Unaudited Unaudited
At At
3 July 2022 4 July 2021
£ £
Trade payables 3,542,647 2,439,107
Other taxation and social security 2,024,514 216,271
Other payables 583,870 454,502
Accruals and deferred income 2,831,384 2,731,307
8,982,415 5,841,187
The carrying value of trade and other payables classified as financial
liabilities measured at amortised, which the Directors consider equal to fair
value.
12. Business combinations
On 23 May 2022, the Company completed the acquisition of Chilango Limited from
RDCP Group Limited.
The book values of identifiable assets and liabilities acquired and their fair
value to the Group was as follows:
Book Value Adjustment Fair Value
£ £ £
Identifiable assets and liabilities acquired:
Intangible assets 821,576 (804,417) 17,159
Right-of-use assets 2,672,467 - 2,672,467
Property, plant & equipment 138,465 - 138,465
Other debtors 108,500 - 108,500
Inventories 51,797 - 51,797
Trade and other receivables 669,708 - 669,708
Cash 75,403 - 75,403
Current liabilities (1,894,486) - (1,894,486)
Non-current liabilities (1,410,390) - (1,410,390)
Lease liabilities (2,672,467) - (2,672,467)
Total net liabilities (unaudited) (1,439,427) (804,417) (2,243,844)
Fair value of consideration paid:
Consideration 100,532
Contingent consideration 250,000
Total consideration 350,532
Goodwill arising (note 7) (unaudited) 2,594,376
On acquisition, the Company made an initial cash outflow of £2.5m. The
acquisition was made on a "cash free, debt free" basis and therefore further
amounts of £1,432,760 were paid to RDCP Group Limited in addition to the
consideration shown above. The Company paid an amount of £966,708 to Chilango
Limited on acquisition for working capital needs. The contingent consideration
of £250,000 remains unpaid at reporting date and is included within other
payables (note 11).
On acquisition, Chilango Limited held trade and other receivables with a book
and fair value of £669,708 representing contractual receivables of £669,708.
The Group therefore expects to collect all contractual receivables.
The goodwill arising on the Chilango Limited acquisition is not deductible for
tax purposes.
13. 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.
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
UK GAAP IFRS UK GAAP IFRS
26 weeks ended IFRS 16 26 weeks ended 26 weeks ended IFRS 16 26 weeks ended
3 July 2022 Transition 3 July 2022 4 July 2021 Transition 4 July 2021
£ £ £ £ £ £
Revenue 26,898,368 - 26,898,368 20,751,269 - 20,751,269
Cost of sales (6,184,070) - (6,184,070) (4,026,315) - (4,026,315)
Gross profit 20,714,298 - 20,714,298 16,724,954 - 16,724,954
Other Operating Income 211,310 - 211,310 1,876,212 - 1,876,212
Administrative expenses (20,712,692) 708,671 (20,004,021) (15,160,396) (147,617) (15,308,013)
Profit/(loss) from operations 212,916 708,671 921,587 3,440,770 (147,617) 3,293,153
Adjusted EBITDA 2,508,013 2,134,969 4,642,982 4,933,509 1,437,575 6,371,084
Pre-opening costs (354,288) 66,708 (287,580) (81,774) 36,730 (45,044)
Share based payments (181,014) - (181,014) - - -
Depreciation and amortisation (1,443,659) (1,493,006) (2,936,665) (1,257,190) (1,621,922) (2,879,113)
Exceptional items (306,866) - (306,866) (106,464) - (106,464)
Non-trading costs (9,270) - (9,270) (47,311) - (47,311)
212,916 708,671 921,587 3,440,770 (147,617) 3,293,153
Finance income 276 - 276 563 - 563
Finance expense (79,681) (578,130) (657,811) (168,179) (492,090) (660,269)
Profit/(loss) before tax 133,511 130,541 264,052 3,273,154 (639,708) 2,633,447
Tax charge (107,531) - (107,531) (340,318) - (340,318)
Profit/(loss) for the period and comprehensive income attributable to equity 25,980 130,541 156,521 2,932,836 (639,708) 2,293,129
holders of the parent company
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
UK GAAP IFRS UK GAAP IFRS
26 weeks ended IFRS 16 26 weeks ended 26 weeks ended IFRS 16 26 weeks ended
3 July 2022 Transition 3 July 2022 4 July 2021 Transition 4 July 2021
£ £ £ £ £ £
Non-current assets
Intangible assets 2,604,279 - 2,604,279 - - -
Right-of-use assets - 29,603,290 29,603,290 - 25,004,186 25,004,186
Property, plant and equipment 10,109,347 824,342 10,933,689 9,367,485 50,341 9,417,826
Total non-current assets 12,713,626 30,427,632 43,141,258 9,367,485 25,054,527 34,422,012
Current assets
Inventories 442,693 - 442,693 266,335 - 266,335
Trade and other receivables 3,632,953 (1,263,034) 2,369,919 2,544,954 (654,676) 1,890,278
Cash and cash equivalents 6,083,998 - 6,083,998 12,871,432 - 12,871,432
Total current assets 10,159,644 (1,263,034) 8,896,610 15,682,721 (654,676) 15,028,045
Total assets 22,873,270 29,164,598 52,037,868 25,050,206 24,399,851 49,450,057
Current liabilities
Trade and other payables 10,763,355 (1,780,940) 8,982,415 8,821,572 (2,980,385) 5,841,187
Lease liabilities - 5,329,676 5,329,676 - 5,801,684 5,801,684
Loans and borrowings - - - 1,250,000 - 1,250,000
Corporation tax liability 1,008,221 - 1,008,221 340,318 - 340,318
Total current liabilities 11,771,576 3,548,736 15,320,312 10,411,890 2,821,299 13,233,189
Non-current liabilities
Lease liabilities - 29,591,636 29,591,636 - 25,269,599 25,269,599
Loans and borrowings 2,921,208 - 2,921,208 10,699,918 - 10,699,918
Total non-current liabilities 2,921,208 29,591,636 32,512,844 10,699,918 25,269,599 35,969,517
Total liabilities 14,692,784 33,140,372 47,833,156 21,111,808 28,090,898 49,202,706
Net assets / (liabilities) 8,180,486 (3,975,774) 4,204,712 3,938,398 (3,691,047) 247,351
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 271,521 - 271,521 - - -
Retained earnings (1,704,095) (3,975,774) (5,679,869) (1,213,788) (3,691,047) (4,904,835)
Total equity 8,180,486 (3,975,774) 4,204,712 3,938,398 (3,691,047) 247,351
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