TIDMMEX
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 GBP26.9m (H1 FY21: GBP20.8m)
-- 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 GBP2.5m (H1 FY21: GBP4.9m)
-- Profit before tax of GBP0.3m (H1 FY21: GBP2.6m)
-- Strong balance sheet with net cash (4) of GBP3.2m at Period
end (H1 FY21: GBP0.9m) and a further GBP7m of liquidity available
under revolving credit facility
Operational and strategic highlights
-- Strategic acquisition of Chilango completed for consideration
of GBP2.75m(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 GBP2.5m plus GBP0.25m
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 cGBP0.25m 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, w e estimate these will result in a three
percentage points reduction in gross margin for FY22 (approximately
GBP1.8 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 GBP0.5m 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, w e 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, Tel: 020 3100 2222
Sole Broker)
Andrew Godber
Edward Thomas
Nikhil Varghese
Hudson Sandler (Public Relations) Tel: 020 7796 4133
Alex Brennan tortilla@hudsonsandler.com
Wendy Baker
Lucy Wollam
Charlotte Cobb
For further information visit 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 GBP26.9m (H1 FY21: GBP20.8m), 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 GBP20k 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
GBP37,000 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 GBP26.9m (H1 FY21: GBP20.8m), 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 GBP20.0m 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 GBP0.2m of
costs incurred for the Chilango acquisition plus associated
redundancy costs of GBP0.1m.
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
GBPm GBPm
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 GBP2.5m (H1 FY21: GBP4.9m).
The GBP2.4m decrease is due to a GBP3.6m reduction in Government
support through changes in VAT, business rates relief and restart
grants, offset by a GBP1.2m 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 GBP0.2m 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 GBP0.7m reflects GBP0.6m of interest charged
in relation to Right of Use assets and GBP0.1m 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 GBP3.2m.
Drawn debt remains unchanged from the end of the FY21 financial
year at GBP3.0m. A reconciliation of net cash between the start and
end of the Period is as follows:
Opening balance GBP6.7m
Adjusted cash generated from operations GBP3.1m
(pre-IFRS 16)
Consideration paid for acquisition of (GBP2.5m)
Chilango
One-off fees incurred for acquisition (GBP0.2m)
of Chilango
Cash arising from acquisition of Chilango GBP0.1m
Capital expenditure for new stores (GBP2.0m)
Maintenance capital expenditure (GBP0.8m)
Payment of FY21 rent (GBP1.2m)
Closing balance GBP3.2m
The Adjusted cash generated from operations (pre-IFRS 16), which
represents the Group's underlying cash flow generation, remains
very healthy at GBP3.2m which is more than sufficient to cover the
Group's growth and maintenance capital expenditure of GBP2.8m. 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 GBP2.5m against a total consideration of GBP2.75m. The remaining
GBP0.25m of consideration is contingent and will be paid upon
achieving certain conditions. The GBP2.5m initial cash outflow
included GBP1.0m which was paid to Chilango for working capital
needs.
The Group also paid GBP1.2m 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 26 weeks
ended ended
3 July 4 July
2022 2021
Note GBP GBP
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
of the parent company 156,521 2,293,129
------------- -------------
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 4 July 2 January
2022 2021 2022
Note GBP GBP GBP
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 Share Merger Share-based Retained Total
capital premium reserve payment earnings
reserve
GBP GBP GBP GBP GBP GBP
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 GBP GBP
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 26 weeks
ended ended
3 July 2022 4 July 2021
GBP GBP
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) I ncludes 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 26 weeks
ended ended
3 July 2022 4 July 2021
GBP GBP
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 26 weeks
ended ended
3 July 2022 4 July 2021
GBP GBP
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 26 weeks
ended ended
3 July 2022 4 July 2021
GBP GBP
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 26 weeks
ended ended
3 July 2022 4 July 2021
GBP GBP
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
earnings per share 38,664,031 359,016
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 GBP
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 GBP
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
GBP GBP
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 GBP Lease liabilities GBP
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 to 2 2 to 5 Over 5 More than Total
1 year years years years 1 year
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,
Leasehold Plant and fittings
Improvements machinery and equipment Total
GBP GBP GBP GBP
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
GBP GBP
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
GBP GBP
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
GBP GBP GBP
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
GBP2.5m. The acquisition was made on a "cash free, debt free" basis
and therefore further amounts of GBP1,432,760 were paid to RDCP
Group Limited in addition to the consideration shown above. The
Company paid an amount of GBP966,708 to Chilango Limited on
acquisition for working capital needs. The contingent consideration
of GBP250,000 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 GBP669,708 representing
contractual receivables of GBP669,708. 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 IFRS 26 weeks 26 weeks IFRS 26 weeks
ended 16 ended ended 16 ended
3 July 3 July 4 July 4 July
2022 Transition 2022 2021 Transition 2021
GBP GBP GBP GBP GBP GBP
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 holders
of the parent
company 25,980 130,541 156,521 2,932,836 (639,708) 2,293,129
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
------------- ------------ ------------ ------------ ------------ ------------
UK GAAP IFRS UK GAAP IFRS
26 weeks IFRS 26 weeks 26 weeks IFRS 26 weeks
ended 16 ended ended 16 ended
3 July 3 July 4 July 4 July
2022 Transition 2022 2021 Transition 2021
GBP GBP GBP GBP GBP GBP
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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IR QBLFXLKLXBBK
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