24 April 2024

 

Tortilla Mexican Grill plc

("Tortilla", the "Group" or the "Company")

Unaudited Annual Results for the 52 weeks ended 31 December 2023

Publication of Annual Report & Accounts

 

Continued profitable sales growth achieved against a turbulent economic backdrop with current trading in-line with expectations

New senior management team embedded and refined strategic priorities launched for 2024 to capitalise on UK and international growth opportunity

Tortilla Mexican Grill ("Tortilla"), the largest and most successful fast-casual Mexican restaurant group in the UK, is pleased to announce its Annual Results for the 52 weeks ended 31 December 2023 (the "Period").

Commenting on the results, Andy Naylor, Chief Executive of Tortilla said: "I am pleased to present my first set of results as Chief Executive Officer. Recent years have seen Tortilla expand strategically through a multi-channel approach, strengthening our operational model as a springboard for sustained, profitable growth. Throughout 2023, we dedicated ourselves to building resilience, especially enhancing profitability, as we recovered from macro events in 2022. Our efforts included streamlining costs, bolstering franchise partnerships, augmenting efficiency via technology investments, and enriching our team with fresh talent, all while continuing site deployments. These initiatives have solidified the foundation for our continued success."

"The appetite for Mexican cuisine is surging, and Tortilla, as the dominant market leader in the UK, has an unparalleled set of advantages to capitalise on this burgeoning opportunity across the UK and Europe. Today, I'm pleased to unveil our reinvigorated strategic vision: 'Tortilla's Vital Five.' Building upon our proven track record, this strategy will create sustainable profitable growth in the years ahead, unlocking substantial value for our shareholders. Tortilla continues to have immense potential and I am excited to lead the business through the next chapter of the journey."

 

Financial Highlights

·	Revenue increased by 14% to £65.7m, continuing to build on the momentum from last year's record, and driven by new openings, the annualisation of the previous year's openings and the full year impact of the 2022 Chilango acquisition
·	LFL revenue growth of 3.6%, equivalent to 4.9% growth when adjusted for the Q1 VAT benefit from 2022
·	Adjusted EBITDA (pre-IFRS 16) saw a 16% YoY increase to £4.6m (2022: £4.0m)
·	Gross profit margin of 77.3% (2022: 76.4%), with the increase attributable to effective negotiations with the Group's main food suppliers, securing favourable commercials across 76% of the food portfolio
·	Cash generative with £3.8m of cash from operations and £1.6m free cash flow
·	Loss before tax of £1.1m (2022: £0.9m)

 

Operational Highlights

·	Continued profitable growth driven by the Group's multi-channel business strategy. 2023 saw cost savings initiatives including negotiating new contracts with key suppliers for more beneficial terms
·	Progress made on UK new store openings, with six Group-operated sites and one franchise site added, taking total to 87 sites - still in line with IPO growth aspiration
·	Accelerating growth via franchising through strengthened relationship with partners SSP Group and Compass Group, as well as Eathos in the Middle East; Franchise sales up 26% for 2023
·	Over 1.5 million Tortilla meals served through delivery partners in 2023
·	Focus on defined multi-channel marketing strategy used to drive brand awareness, driving customer footfall through events and innovative promotions, uplift of 116% active users in loyalty scheme and 400,000 customers at period end
·	Investment in food and menu development to drive continuous improvement and maintain market leading position and improved customer satisfaction; new Director of Food appointed post-period end to lead new innovative menu development
·	Further strengthening of Board and management with Keith Down appointed Senior Independent Non-Executive Director and Chair of Audit Committee, and Andrew Brook as Technology Director

 

Post-Period End Trading & Outlook

·	New Management Team Embedded: CEO succession announced in February 2024 with Richard Morris stepping down, replaced by Andy Naylor, previously CFO and UK Managing Director and CFO Maria Denny also appointed to the Board in Q1'24
·	Launch of 'Tortilla's Vital 5': New strategic approach launched to drive disciplined profitable growth and expand Tortilla in the UK and overseas
·	Double Down on Franchising: Plans in place to accelerate growth via franchising, whilst continuing own store roll out in grade A locations, at least five openings planned in 2024 with our partners
·	Current Trading In Line With Management Expectations: Delivery strategy and cost savings initiatives resulting in improved profit conversion; LFL sales for Q1 in line with expectation with outlook for demand expected to improve as consumer finances recover in H2'24. Minimum of three UK Tortilla operated sites planned for 2024, with Manchester Arndale to open in May

 

ENQUIRIES

Tortilla Mexican Grill PLC	Via Houston
Emma Woods, Non-Executive Chair
Andy Naylor, CEO
Maria Denny, CFO
Liberum Capital Limited (Nominated Adviser, Sole Broker)	Tel: 020 3100 2222
Andrew Godber
Edward Thomas
Nikhil Varghese
Houston (Public Relations)	Tel: 0204 529 0549
[email protected]
Kate Hoare
Kelsey Traynor
Ben Robinson
Mackenzie Parry-Bull

 

About Tortilla Mexican Grill plc

 

Founded in October 2007 by Brandon and Jen Stephens, Tortilla is the UK's largest fast-casual Mexican restaurant brand with a fully customisable and authentic California-style Mexican menu.

Tortilla operates 87 restaurants globally, including through franchise partnerships in the UK with SSP Group plc and Compass UK & Ireland, and in the Middle East with Eathos.

The brand serves more than 6 million customers every year.

Food provenance and quality is a critical component of our proposition. All fillings for Tortilla's burritos, salads and tacos are prepared fresh daily, free from artificial flavours or preservatives. Every dish is fully customisable with thousands of flavour combinations available to try.

Tortilla is headquartered in London and employs more than 1100 people.

More details at tortillagroup.co.uk

 

CHAIR'S STATEMENT

The Tortilla Board considers 2023 as a year of recovery. We have made significant strategic progress against the long-term plan to drive disciplined profit growth. This was underpinned by a rigorous focus on careful cost management and operational efficiency improvements which will yield full year margin benefit in 2024 and beyond.

Whilst consumer spending on 'eating out' remained under pressure in 2023 from the wider macro-economic uncertainty and high inflation, our customer research continues to endorse long term interest in a high-quality Mexican-inspired burrito proposition. We offer customers fresh, healthy, convenient, and customisable food and drink in a fun and vibrant atmosphere at a competitive price. We were delighted to see demand for the brand remaining very robust across the Group's high performing sites in our London portfolio, busy city centre locations, key shopping centres and travel hubs, where we enjoy stronger levels of awareness. The Board has identified that trading in newer, lower footfall regional towns and cities, where Tortilla is less well known, has been more challenging. However, we see significant opportunities to address this through our brand and marketing initiatives, with several plans already underway to drive increased footfall in 2024.

Delivery continued to be an important sales channel for Tortilla. Whilst the multi-partner approach supported strong growth in sales volume and awareness, the move to a triple aggregator model challenged margin performance over the course of 2023. Since the period end, we have been pleased to complete the launch of a new delivery structure, strengthening our relationships between fewer partners which will improve our margins from the delivery channel in 2024. Early signs of this refined delivery strategy have been encouraging and will continue to be reinforced with exciting, joint funded marketing plans and investment in increased brand awareness.

The Board firmly believes in the significant opportunity for the business as the largest and most successful fast-casual Mexican restaurant group, in what is still an under-represented segment of the fast casual dining space, both in the UK and internationally. In 2023 we opened seven new stores in the UK, alongside the ongoing successful rebranding of the Chilango portfolio which was acquired in 2022. Our flexible business model, with a centralised production unit, lends itself well to a range of site formats and we are particularly excited about the potential to accelerate the speed of growth in the UK and internationally through franchising. Our successful collaboration with both SSP and Compass Group in the UK, and Eathos in the Middle East bears early testament to the longer-term potential to grow through franchising partnerships.

Reflecting on the ongoing market challenges, progress and tremendous opportunities for Tortilla, the Board and the Executive team have spent time in the latter part of 2023 developing our growth strategy. This has seen us refine our approach around five strategic pillars, 'Tortilla's Vital 5,' through which we will drive profitable growth in the years ahead as we continue to expand the Tortilla brand, both in the UK and overseas.

Our Vital 5 are:

1.   Improve UK profitability

2.   Invest in brand to drive growth

3.   Invest in team and tech

4.   Double down on franchise

5.   Develop brand internationally

Details of these strategic pillars are further outlined in the CEO update.

Board Changes

An important focus for the Board over the course of 2023 has been succession planning, paving the way for Richard Morris, our long serving CEO, to step down in Q1 2024. Richard has had a distinguished 35 year career in hospitality and played a transformational leadership role for Tortilla, taking it from 13 sites to 87 over the last 10 years. He leaves with our heartfelt thanks for his contribution to the business.

The Board had previously identified and developed Andy Naylor as Richard's successor and was pleased to announce his appointment to the role of CEO. Andy has worked alongside Richard for the last seven years, initially as Chief Financial Officer, then with added Business Development leadership responsibilities and more recently as UK Managing Director. A dynamic leader, Andy's commercial expertise and growth mindset have seen him play a critical role in shaping Tortilla's multi-channel and franchise business strategy and his appointment marks the start of an important new chapter for Tortilla as we leverage the business's increasing scale and momentum to drive further UK and international expansion.

Following an extensive search, we were also very pleased to confirm Maria Denny's appointment to the Board as Chief Financial Officer in February 2024. Maria brings a wealth of experience in the food and retail sector having held senior finance positions at Müller, Dairy Crest Limited and most recently as CFO UK and Ireland at Signify. I look forward to working closely with both her and Andy as we double down on operational excellence under the new management, to drive disciplined profitable growth.

Finally, we were pleased to appoint Keith Down in August 2023 as Senior Independent Non-Executive Director, and Chair of the Audit Committee. Keith strengthens the Board and brings with him a great deal of leadership experience gained across a broad range of successful consumer-facing businesses having held CFO roles at JD Weatherspoon Plc, Go-Ahead Plc, Dunelm Plc, and most recently as Finance Director of Selfridges Group. I have no doubt that the Board will benefit from his skills and insights.

2024 - Focussing on Tortilla's Vital 5

Whilst we appreciate that the trading environment will remain challenging throughout 2024 as consumer spending on eating out remains under pressure, we are confident that our great value proposition, ambitious and invigorated team, and revised strategy focusing on the Vital 5, positions us well for an exciting and successful year ahead.

Finally, I would like to take this opportunity to thank every member of the Tortilla team along with our franchise partners for their continued support and commitment and look forward to announcing further progress in 2024.

 

Emma Woods

CHAIR

24 April 2024

 

CHIEF EXECUTIVE OFFICER'S STATEMENT

 

I am delighted to be writing to shareholders in what marks my inaugural set of results as Chief Executive Officer. Having been with the business for seven years, I am confident that the Tortilla brand continues to have immense potential in the UK and international markets. Recent years have seen the business take significant strides to expand our presence through our multi-channel business strategy and strengthen our operating model to set the foundation for continued profitable growth. I am looking forward to working with our newly appointed CFO Maria Denny, the Board and wider team to accelerate this journey throughout 2024 and beyond. Under the new management, we will be focusing on the following strategic pillars, 'Tortilla's Vital 5':

1.   Improve UK profitability

2.   Invest in brand to drive growth

3.   Invest in team and tech

4.   Double down on franchise

5.   Develop brand internationally

Improve UK profitability

 

One of the key pillars of Tortilla's success has been our strong relationships with our suppliers. In 2022 we encountered unprecedented levels of food inflation, however during 2023 we started to see the cost pressure ease. As we gain scale, we have been able to renegotiate contracts with our key suppliers for more beneficial terms, which is testament to the ongoing strength of these relationships. In 2023, we also moved energy providers to ensure we maintained the best possible rates across Tortilla's sites, given the significant increase in energy costs across the UK. Our utility cost expenditure was also further reduced by the introduction of our new chicken pibil product as it enabled us to remove grills from numerous sites helping the business to not just reduce costs but also lower its carbon footprint. As 2024 progresses we are well positioned to realise the full year benefit of these cost saving initiatives whilst we continue to strive for operational excellence to lower our cost base and enhance our profitability further.

 

The Group delivered more than 1.5 million Tortilla main meals across Uber Eats, Just Eat and Deliveroo in 2023, whilst maintaining an average of a 4.6-star customer app rating. Delivery is an important sales channel for Tortilla as the food offering is well-suited to being consumed off-premises, with sales made via third-party delivery platforms accounting for 30% of our own store sales. Whilst the Group's multi-partner approach to delivery has supported strong growth in sales volumes and awareness, delivery commission charges have challenged margin performance. To mitigate this, we sought for a new delivery structure and to strengthen the relationship between fewer partners. In December 2023, Tortilla announced a review of the brand's delivery strategy to establish a new delivery structure and I'm pleased to report that in February 2024, we concluded this review, announcing Uber Eats and Just Eat as our chosen delivery strategy partners. The dual delivery partner approach has resulted in more favourable contractual terms, which will lead to improved margins in the year ahead. The refined strategy will also see Tortilla collaborating on some exciting jointly funded marketing efforts, including the launch of exclusive products and offers, and heavy investment into brand awareness to attract new customers through a growing UK customer base.

 

Invest in brand to drive growth

 

With macro-economic headwinds impacting the wider market, the Group inevitably faced a challenging year in 2023 as cost-of-living pressures weighed on the UK customer appetite for eating out. Whilst central London and higher footfall locations remained more resilient, trading across regional town centres, where the Tortilla brand is less established, was more challenging.

Independent market research[1] shows lower brand awareness for Tortilla than for similar sized restaurant groups, but with a higher conversion rate. We know that we are a much-loved brand for customers that know us and therefore there is a compelling case to invest more heavily in driving awareness through an exciting series of Tortilla marketing strategies.

 

In 2023, through our revitalised marketing strategy, the Group has built and maintained a loyal and diverse customer base and our team worked hard over the course of the year to drive customer footfall across our sites through targeted events and innovative promotions. Our loyalty scheme also now enables a more generous promotional offer through which our customers can receive a free burrito after five purchases at a Tortilla site. The scheme continues to grow and drive customer spend, retention, and frequency generating an uplift of 116% in active users since the previous year to more than 400,000 customers at period end, with a further 50,000 sign-ups in Q1 2024. Frequency is also up +16% year on year and spend is 5% higher than the Group average. In 2024 we will invest further in marketing via promotions, sampling events, social media campaigns, and collaboration with local partners. We also intend to drive visitor frequency and retention by enhancing our loyalty program even further by the launch of a new industry leading loyalty platform in 2024, which will enable us to fully engage with our customers and offer them new incentives and rewards.

 

Another important area of focus has been to invest in food and menu development to drive continuous improvement to maintain our market leading position and improve customer satisfaction. During the year we launched a new chicken pibil along with new rice and salsa recipes. The 'Chicken Pibil Burrito' became our most ordered dish in 2023. With the appointment of a Director of Food, James Garland, due to join in June 2024, the investment into food and menu development will see exciting new authentic flavours and menu items appearing in the year ahead. James is currently serving as Director of Food Operations, Supply Chain and Compliance at Honest Burgers, a business highly respected for food quality. James brings a wealth of experience with him and will undoubtably have a transformational impact on our food quality, brand collaborations and innovation. It is our firm believe that this will create additional opportunities for consumers to engage with our brand and consequently leverage a significant purchase frequency opportunity.

 

Invest in team and tech

 

Alongside the Board appointments mentioned by Emma in the Chair's statement, we have continued to strengthen our wider management team during 2023 with the appointment of Andrew Brook who joined the Group as Head of IT in March 2023, and was subsequently promoted to Technology Director in December 2023, highlighting our ambition to upscale our application of technology within the business. Andrew Brook, and our upcoming appointment of James Garland as Director of Food, represent key appointments to develop the business going forward.

 

Our Annual Conference was held in February 2024 to celebrate the success of the business and the individuals within it. It was a hugely motivational and positive day, with the vision for the business over the next year shared with all our Head Office and General Manager teams. The spirit and culture of the Tortilla team are inherent to the Group's success, and I would like to once again thank the entire team for their hard work and commitment over the course of the year.

 

On the technology front, we strive to ensure this is at the forefront of our customer service offering and are continually reviewing how we can improve our operations across the wider business. In 2023, we opened our very first digital concept, a kiosk-only-site in London Wall, located in the City of London's financial district. The site is performing well and is positioned to take advantage of the peak lunch time trade from local office workers. The average customer journey time is just two minutes and 20 seconds down from nearly 10 minutes prior to the kiosk implementation, ensuring a steady flow of customers. In addition, the implementation of kiosks has seen the average order value increase by 14%. As this is the first of its kind for Tortilla, we have learnt important lessons on implementation, ensuring the customer journey is as smooth as possible and how to manage labour requirements under this model. This proof-of-concept is promising and indicates the kiosk-only approach may be a viable solution for sites with significant volume demand that cannot currently be fully met. We will continue review opportunities to integrate this model into our expansion strategy for the future with kiosks installed in our Bath site during the first half of 2024.

 

2023 also saw the successful launch of a nationwide rollout of delivery order-aggregation software to simplify the management of multi-platform delivery channels at every store and to maximise the speed and accuracy of delivery order fulfilment. Finally, we have also invested in a series of productivity tools to support the Group in managing rota labour and consequently drive efficiencies and improved margins across our sites. We look forward to seeing the full benefits of these initiatives in the new financial year.

 

Double down on franchise

Franchising has strategic importance to our business, with our operating model working well for franchisees due to the flexibility of the site format, simple kitchen setup and a central production food model that provides consistency of high food quality and enables a simple labour model without reliance on chefs. In addition, as an established business, our purchasing power and investment in marketing and food development benefit our franchisees.

 

We have continued to strengthen our relationships with our high calibre portfolio of existing partners in the UK, including SSP Group ("SSP") where we are focussed on expansion across travel hub locations and Compass Group ("Compass") where we are focused on higher education UK campuses. These sites continue to perform very well, with strong like-for-like sales performance across existing sites and SSP achieving sales records in all locations. In 2023, SSP opened a new site in Manchester Piccadilly railway station. Post the year end, we also announced the launch of at least four new SSP restaurants in 2024, with an exciting pipeline of additional opportunities anticipated for 2025 and beyond.

 

Alongside this, our Middle East franchise business with Eathos had a record year, giving us confidence to explore further franchise opportunities in the Middle East and other jurisdictions, such as continental Europe. We expect to open a further site in the Middle East in 2024, with Eathos, and are hugely excited to see this growth.

 

Looking ahead, we see significant strategic merit to accelerate our growth through expanding our franchise network, both through existing and new partnerships and therefore we will evolve the mix of new openings to focus more heavily on franchising whilst we take a more targeted approach on the rollout of own stores, adding in primary locations where the brand has high awareness. We will open at least eight sites in 2024, compared to seven sites in 2023 which means we are still in line with our IPO growth aspiration, having doubled our rollout commitment in 2022. 

 

Develop brand internationally

 

Tortilla is already the largest fast-casual Mexican chain in the UK & Europe and Mexican cuisine continues to grow in popularity across the globe. The UK will always remain at the core of Tortilla, but we are aware that there is a huge opportunity to expand in other markets overseas. The Group continues to seek out relationships with new businesses and partnerships as we develop our European growth strategy. We will update shareholders with any significant developments of this international strategy as and when appropriate.

 

Current trading and outlook

 

Current trading is in line with management expectations and our profit conversion is improving. Our LFL sales are 4.7% down, which is in line with expectation and reflecting the anticipated impact of change in delivery strategy in February this year. The early indications of the change to a dual delivery model are encouraging. We expect the favourable upside in profitability to continue throughout 2024 as we leverage on initiatives implemented in 2023 and launch new ones. Our key focus is to drive sales growth and that underpins our investment in product quality, with the upcoming appointment of a Director of Food, and our deployment of cash for a big drive in raising brand awareness through marketing initiatives. We have already made progress towards our targeted expansion plans with a site in Manchester Arndale expected to open in May, and our franchise partners expected to exceed the previous store opening plans with at least 5 new stores now expected for 2024.

 

We have a brand and product to be hugely proud of and I am very excited to lead the business through the next step of the journey. Our team members, managers, support office staff, executive team and Board of Directors all share the ambition for growing the brand as we all see considerable opportunity in the UK and internationally.

 

Andy Naylor

CHIEF EXECUTIVE OFFICER

24 April 2024

 

KEY STRENGTHS

 

Key strengths

 

CHIEF FINANCIAL OFFICER'S REVIEW

Group financial KPI summary

	2023	2022	Change
Revenue	£65.7m	£57.7m	+ 13.8%
Gross profit margin	77.3%	76.4%	+ 0.9% pts
Administrative expenses	£50.1m	£43.6m	+ 15.0%
Net (loss)/profit after tax	(£1.1m)	(£0.6m)	+ 71.2%
Cash generated from operations	£9.9m	£7.6m	+ 30.3%
Alternative performance measures ("APMs")
LFL revenue growth	3.6%1	16.4%2	- 12.8% pts
Adjusted EBITDA (pre-IFRS 16) 3	£4.6m	£4.0m	+ 15.8%
Net cash/(debt) (pre-IFRS-16) 4	(£1.3m)	(£0.6m)	- 135.2%

¹ defined as the percentage change in like-for-like sales compared to 2022.

² defined as the percentage change in like-for-like sales compared to 2019, to exclude periods of non-trading

³defined as statutory operating profit before interest, tax, depreciation and amortisation (before application of IFRS 16 and excluding exceptional costs) and reflects the underlying trade of the Group. The reconciliation to profit from operations is set out below in this section of the report.

⁴ defined as cash and cash equivalents less gross debt.  Calculated on a pre-IFRS 16 basis and so does not include lease liabilities.

 

Revenue

 

Revenue increased by 13.8% to £65.7m compared to £57.7m in 2022. This was attributable to the following factors:

 

·    The addition of six new equity sites in 2023, one franchise site, and the annualisation of the 2022 openings. The Group remains ahead of its aim of opening 45 new sites across the five years following its IPO in October 2021.

·    An underlying 3.6% LFL revenue growth across the estate. This translates to 4.9% growth when adjusted for Q1 VAT benefit from 2022.

 

The above factors are offset by a £0.8m decrease resulting from the VAT benefit that was obtained in Q1 2022.

 

Gross profit margin

 

The Group achieved a gross profit margin in 2023 of 77.3% (2022: 76.4%). This 0.9% increase was attributable to effective negotiations with the Group's main food suppliers, securing favourable commercials across 76% of the basket.

 

Administrative expenses

 

Under application of IFRS 16, administrative expenses exclude property rents (except for turnover rent) and incorporate the depreciation of right-of-use assets.

 

Administrative costs increased by 15.0% year-on-year to £50.1m. This is largely attributable to the increased level of trade in 2023. As a percentage of revenue, administrative expenses remained relatively consistent on prior year at 76.3% (2022: 75.5%) with some additional costs being linked to strengthening our Head Office support as we continue to grow. Management has maintained focus on cost control with the benefits of multiple initiatives - in strategic partnerships, energy, and productivity. The full benefit of cost focused activities during the year will materialise in 2024.

 

Administrative expenses also incorporate exceptional items which decreased to £0.4m in 2023 (2022: £0.5m).  Of the £0.5m in 2022, £0.4m was associated to costs incurred in relation to the Chilango acquisition. IFRS 3 requires acquisition costs to be expensed to the P&L rather than capitalised as part of the transaction. Of the £0.4m in 2023, £0.2m was incurred in relation to a potential new site that was subsequently aborted, and £0.1m related to restructuring costs.

 

We performed detailed impairment testing, resulting in an impairment charge of £0.3m in 2023 (2022: £0.2m). The discount rate used for the weighted average cost of capital (WACC) was 15.1% pre-tax (2022: 13.1%). See note 3 to the Financial Statements for more information.

 

 

Adjusted EBITDA (pre-IFRS 16)

 

The Group utilises Adjusted EBITDA (pre-IFRS 16) as the primary assessment metric of profitability. A reconciliation of this measure compared to profit from operations is below.

		52 weeks ended	52 weeks ended
		31 December 2023	1 January 2023
		£	£
Profit from operations		684,110	536,129
Pre-opening costs		344,570	813,154
Share option expense		387,443	362,028
Depreciation and amortisation		8,155,814	6,194,997
Loss on disposal of fixed assets		40,746	17,781
Impairment charge / (reversal)		289,901	(208,023)
Exceptional items		437,756	542,140
Non-trading costs		18,540	18,538
IFRS 16 adjustment*		(5,793,605)	(4,304,273)
Adjusted EBITDA (pre-IFRS 16)		4,565,275	3,972,471

 

*The IFRS 16 adjustment relates to the impact of IFRS 16 on rental expenses contained within administrative expenses.

 

The Group generated £4.6m of Adjusted EBITDA (pre-IFRS 16), an increase of £0.6m compared to 2022.

 

Whilst the challenges of inflation have impacted our adjusted EBITDA for 2023, we remain confident that our competitive price point and customisable offering overall puts us in a strong position to continue to grow and succeed. The 2023 successful supplier negotiations will further help EBITDA growth in the new year.

 

Cash flow and liquidity

 

Cash generated from operations increased in line with the increase in Adjusted EBITDA.

 

Working capital requirements are by nature low and are indeed negative, with cash from in-store customers received and recognised at the point of sale. Hence, trade and other receivables in the main relate to delivery partner receipts and landlord deposits. Trade and other payables relate to supplier credit terms, wages and utility accruals. Additionally, fast delivery times and Central Production Unit (CPU) efficiencies allow for low stock level requirements, meaning inventories are kept at a minimum. This negative working capital position should continue to grow in line with expansion plans.

 

Cash expenditure on property, plant and equipment decreased due to both fewer new sites in 2023 compared to 2022 and higher maintenance capital costs arising in 2022 from numerous refurbishments when the Group converted five Chilango sites to Tortilla sites.

 

In the prior year, 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 liquidity position of the Group remains strong, with a low current ratio of 0.3. The Group is confident it can pay its current liabilities as they fall due, as consumers pay at the point of sale and the inventory is used before supplier payment is due. The Group also have an overdraft facility of £2.5m with Santander which can be utilised for any unforeseen events. The overdraft is part of and not in addition to the revolving credit facility referred to below.

 

Financing and net debt

 

The Group had cash balances of £1.6m on 31 December 2023, which translated to a net debt position of £1.3m (2022: net cash of £0.6m), excluding IFRS 16 lease liabilities.

 

The Group's £10.0m revolving credit facility (RCF) is held with Santander UK plc and comprises of a drawn balance of £3.0m at 31 December 2023 with a further £7.0m of undrawn facility available to the Group. This additional £7.0m remains undrawn as at the date of signing these financial statements.

 

The financing facility attracts interest at a rate of 2.75% above SONIA, subject to an upward-only ratchet based on increased net leverage levels and is secured until 14 September 2026.

 

Share based payments

 

In 2023, the Group granted further Long-Term Incentive Plan (LTIP) shares to the senior leadership team. Share-based payment expenses of £0.4m were recognised in 2023 (2022: £0.4m) relating to the Group's Long Term Incentive Plan ("LTIP") created as part of the Group's admission to the Alternative Investment Market ("AIM"). Further details around vesting conditions are disclosed in Note 8.

 

Dividend

 

The Board did not recommend a dividend for 2023. The Group's capital will be focused on growth over the coming years with the dividend policy subject to re-assessment going forward.

 

Going concern

 

In assessing the going concern position of the Group for the consolidated financial statements for the 52 weeks ending 31 December 2023 the Directors have considered the Group's cash flow, liquidity and business activities.

 

During 2023 The Group did not draw down any further on the debt facilities meaning it has access to a further £7.0m of financing and this remained undrawn at 31 December 2023. The Group had cash balances of £1.6m on 31 December 2023, which translated to a net debt position of £1.3m.

 

The Group has prepared forecasts for the next twelve months, including a base case and a severe downside case. Refer to note 2.6 of the financial statements for details of the assumptions and methodology applied.

 

Upon consideration of this analysis and the principal risks faced by the Group, the Directors are satisfied that the Group has adequate resources to continue in operation for the foreseeable future, a period of at least twelve months from the date of this report. Accordingly, the Directors have concluded that it is appropriate to prepare these financial statements on a going concern basis.

 

Maria Denny
CHIEF FINANCIAL OFFICER
24 April 2024

 

FINANCIAL STATEMENTS

Unaudited consolidated statement of comprehensive income

For the 52 weeks ended 31 December 2023

			52 weeks ended 31 December 2023	52 weeks ended 1 January 2023
	Note		£	£
Revenue	4		65,674,965	57,698,487
Cost of sales			(14,883,204)	(13,605,825)
Gross profit			50,791,761	44,092,662
Administrative expenses			(50,107,651)	(43,556,533)
Operating profit	5		684,110	536,129
Finance income	9		31,900	1,384
Finance expense	10		(1,801,176)	(1,466,062)
Loss before taxation			(1,085,166)	(928,549)
Tax on loss	11		(7,377)	290,327
Loss for the period and comprehensive income attributable to equity holders of the parent company			(1,092,543)	(638,222)
Loss per share for profit attributable to the owners of the parent during the period
Basic and diluted (pence)	12		(2.8)	(1.7)

 

There were no items of recognised income or expense other than as shown in the Consolidated statement of comprehensive income above. All activities relate to continuing operations.

 

The accompanying notes within this announcement form an integral part of these financial statements.

 

Unaudited consolidated statement of financial position

As at 31 December 2023

	Note		31 December 2023 £			1 January 2023 £
Non-Current Asset
Intangible assets	14		2,627,039			2,632,205
Tangible assets	15		14,119,801			13,721,101
Right-of-use assets	13		29,520,494			31,035,358
			46,267,334			47,388,664
Current assets
Inventories	16	358,861		397,083
Trade and other receivables	17	3,135,075		2,193,877
Cash at bank and in hand	18	1,644,674		2,375,800
		5,138,610		4,966,760
Current liabilities
Trade and other payables	19	(9,749,505)		(9,110,069)
Lease liabilities	13	(5,670,902)		(5,614,340)
Net current liabilities			(10,281,797)			(9,757,649)
Total assets less current liabilities			35,985,537			37,631,015
Non-current liabilities
Loans and borrowings	20		(2,949,021)			(2,930,481)
Lease liabilities	13		(29,532,937)			(31,109,551)
Deferred taxation	21	(617,696)		-
			(617,696)			-
Net assets			2,885,883			3,590,983
Equity attributable to equity holders of the company
Called up share capital	22		386,640			386,640
Share premium account	23		4,433,250			4,433,250
Share based payment reserve	23		839,978			452,535
Merger reserve	23		4,793,170			4,793,170
Profit and loss account	23		(7,567,155)			(6,474,612)
Total equity			2,885,883			3,590,983

 

The accompanying notes within this announcement form an integral part of these Financial Statements.

 

 

Unaudited consolidated statement of changes in equity

For the 52 weeks ended 31 December 2023

		Called up share capital	Share premium account	Share-based payment reserve	Merger reserve	Profit and loss account	Total equity
		£	£	£	£	£	£
At 3 January 2022		386,640	4,433,250	90,507	4,793,170	(5,836,390)	3,867,177
Loss for the period		-	-	-	-	(638,222)	(638,222)
Share-based payments		-	-	362,028	-	-	362,028
At 2 January 2023		386,640	4,433,250	452,535	4,793,170	(6,474,612)	3,590,983
Loss for the period		-	-	-	-	(1,092,543)	(1,092,543)
Share-based payments		-	-	387,443	-	-	387,443
At 31 December 2023		386,640	4,433,250	839,978	4,793,170	(7,567,155)	2,885,883

 

The accompanying notes within this announcement form an integral part of these Financial Statements.

 

 

Unaudited consolidated statement of cash flows

For the 52 weeks ended 31 December 2023

	52 weeks ended 31 December 2023 £			52 weeks ended 1 January 2023 £
Cash flows from operating activities
Loss for the financial period	(1,092,543)			(638,222)
Adjustments for:
Amortisation of intangible assets	5,166			10,456
Depreciation of right-to-use asset	4,344,878			3,657,710
Depreciation of property, plant and equipment	3,805,769			2,501,433
Loss on disposal of tangible assets	40,746			17,780
Net finance expense	269,491			183,939
Taxation charge/(credit)	7,377			(290,327)
Decrease/(Increase) in inventories	38,222			(19,178)
(Increase)/Decrease in trade and other receivables	(327,477)			196,503
Increase in trade and other payables	639,436			762,249
Impairment of property, plant and equipment	289,901			160,930
Reversal of impairment of property, plant and equipment	-			(368,953)
Impairment of right-to-use asset	-			380,673
Corporation tax paid	(3,402)			(610,363)
Share based payments	387,443			362,028
Finance cost on lease liabilities	1,531,685			1,280,739
Net cash generated from operating activities	9,936,692			7,587,397
Cash flows from investing activities
Purchase of tangible fixed assets	(4,535,117)			(6,643,962)
Interest received	31,900			1,384
Acquisitions, net of cash acquired	-			(1,687,365)
Net cash from investing activities	(4,503,217)			(8,329,943)
Cash flows from financing activities
Interest paid	(282,849)			(181,759)
Payments made in respect of lease liabilities	(5,881,752)			(6,353,067)
Net cash used in financing activities	(6,164,601)			(6,534,826)
Net decrease in cash and cash equivalents	(731,126)			(7,277,372)
Cash and cash equivalents at beginning of period	2,375,800			9,653,172
Cash and cash equivalents at the end of period	1,644,674			2,375,800

 

 

NOTES TO THE UNAUDITED FINANCIAL STATEMENTS

 

1.   General information

 

Tortilla Mexican Grill plc, the "Company" together with its subsidiaries, "the Group", is a public limited company whose shares are publicly traded on the Alternative Investment Market, "AIM", and is incorporated and domiciled in the United Kingdom and registered in England and Wales (registration number 13511888).

 

The registered address of Tortilla Mexican Grill plc and all subsidiaries is 142-144 New Cavendish Street, London, W1W 6YF, United Kingdom. A list of the Company's subsidiaries is presented in note 25.

 

The Group's principal activity is the operation and management of restaurants trading under the Tortilla and Chilango brands both within the United Kingdom and the Middle East.

 

Judgements made by the directors in the application of these accounting policies have been discussed in note 3.

 

2.   Accounting policies

 

2.1     Statement of compliance

 

The consolidated financial statements have been prepared in accordance with International Accounting Standards in conformity with the requirements of the Companies Act 2006 and in accordance with International Financial Reporting Standards as adopted by the UK ("Adopted IFRS").

 

Tortilla Mexican Grill plc has taken advantage of the exemption under section 408 of the Companies Act 2006 to not present its own statement of comprehensive income. The loss for the single entity Tortilla Mexican Grill plc for the 52 weeks ended 31 December 2023 was £5,479 (1 January 2023: £206,060).

 

2.2     Basis of preparation of financial statements

 

The consolidated financial information contained in this document includes the consolidated statement of comprehensive income, the consolidated statement of financial position, the consolidated statement of changes in equity and the consolidated statement of cash flows, and related notes for the companies which comprise the Group.

 

The financial statements have been prepared on an accruals basis and under the historical cost convention unless otherwise stated. The financial statements are presented in GBP.

 

2.3     New standards, amendments and interpretations adopted

 

The Directors do not consider that there are any new standards or amendments applicable for the 52 weeks ending 31 December 2023 that would have a material impact on the Group's accounting treatment.

 

2.4     Standards issued but not yet effective

 

The following standards are applicable for financial years beginning on/after 1 January 2024:

 

• IFRS 10 - Sale or contribution of assets between an investor and its associate or joint venture

• IFRS 16 - Leases on sale and leaseback

• IAS 1 - Classification of liabilities as current or non-current

• IAS 1 - Non-current liabilities with covenants

• IAS 7 and IFRS 7 - Supplier finance arrangements

 

 

The following standards are applicable for financial years beginning on/after 1 January 2025:

 

• IAS 21 - Lack of exchangeability

 

When applied, none of these amendments are expected to have a material impact on the Group.