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
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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
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LFL revenue growth of 3.6%,
equivalent to 4.9% growth when adjusted for the Q1 VAT benefit from
2022
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Adjusted EBITDA (pre-IFRS 16) saw
a 16% YoY increase to £4.6m (2022: £4.0m)
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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
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Cash generative with £3.8m of cash
from operations and £1.6m free cash flow
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Loss before tax of £1.1m (2022:
£0.9m)
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Operational Highlights
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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
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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
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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
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Over 1.5 million Tortilla meals
served through delivery partners in 2023
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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
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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
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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
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Post-Period End Trading & Outlook
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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
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Launch of 'Tortilla's Vital 5': New strategic approach launched to drive disciplined profitable growth and
expand Tortilla in the UK and overseas
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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
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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
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ENQUIRIES
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Tortilla Mexican Grill PLC
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Via Houston
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Emma Woods, Non-Executive
Chair
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Andy Naylor, CEO
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Maria Denny, CFO
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Liberum Capital Limited (Nominated Adviser, Sole
Broker)
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Tel: 020 3100 2222
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Andrew Godber
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Edward Thomas
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Nikhil Varghese
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Houston (Public Relations)
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Tel: 0204 529 0549
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Tortilla@houston.co.uk
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Kate Hoare
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Kelsey Traynor
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Ben Robinson
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Mackenzie Parry-Bull
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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
Through continuous innovation, we
work hard to maintain high standards in all aspects of business.
Over the past few years, the following elements have proven areas
of particular strength.
Our products
Tortilla has developed a great
reputation for its freshly prepared, customisable, value-for-money
product range of burritos, tacos and salads. This has enabled us to
appeal to a wide demographic, maintaining our loyal customer base
and generating further customers as we grow. Our defining
characteristics also align with forecasted consumer trends and
preferences, providing a positive outlook for the
future.
By offering great value-for-money,
we have successfully expanded operations across the UK, and are
able to charge a minor delivery premium (to address delivery
commission costs) while remaining highly competitive.
Embracing sector trends
The Tortilla Group observes and
embraces key consumer trends, flexing our products, services, and
formats to capitalise on growing demand and maintain relevance in a
rapidly changing market. Our offering thus adheres to the dominant
demands driving our sector, which include:
•
Healthy
eating - packed with rice, beans,
vegetables and plant-based options, our menu suits those seeking
healthy fast-casual food
•
Fresh and high
provenance - our freshly prepared
food is from high quality, responsible sources communicated with
full transparency to the consumer
•
Convenience - Tortilla food
is available in-store, via takeaway or delivery, ensuring maximum
options for optimum convenience, and reaching more customers than
ever before via our multi-channel strategy
•
Customisation - a wide range
of options enable customers to tailor their Tortilla meal to their
preferences and dietary requirements
•
Ethnic
food - Tortilla's authentic Mexican
style food caters to consumers' growing interest in ethnic
food
Flexible business model
Much of the Group's success,
during the pandemic and beyond, can be attributed to our ability to
adapt, flexing our business model quickly and effectively to suit
circumstances and locations.
Our flexibility is driven by three
key factors of our business model:
•
Trading strength across eat-in, takeaway and
delivery channels
•
Ability to trade in small units and without
extraction
•
Value-for-money offering that appeals to diverse
customers including students, local residents, and office
workers
In contrast to similar fast-casual
restaurant businesses, Tortilla has achieved significant
geographical diversification throughout the UK - in terms of both
presence and sales. Over half of our estate and nine of our top
twenty selling stores are located outside of London, covering a
wide range of sites including shopping centres, high streets,
residential areas, a delivery-only kitchen and transport hubs. We
are adept at scouting and identifying the best format for new
locations.
Moreover, our scalable central
infrastructure, currently a 5,500 square foot Central Production
Unit ("CPU") in Tottenham Hale, provides cost advantages over our
direct competitors, the flexibility to increase its size in tandem
with our growth strategy and the assurance that product quality
remains consistent across all sites.
Marketing strategy
Through our clearly defined
multi-channel marketing strategy, the Group has built and
maintained a loyal and diverse customer base.
Our national campaigns run
throughout the year with special promotions for seasonal products
and recipes across print, online and social media, alongside
targeted regional marketing for new site launches.
With a large proportion of
customers in the younger age demographic (aged 16-34), we achieve
significant engagement via social media and our vast influencer
network drives widespread engagement across the most popular social
media platforms, sharing bite-size videos reaching millions of
views.
Strong leadership
Tortilla's senior Management team
continues to excel in its ability to deliver strong and sustainable
growth. Under the stewardship of an experienced Board of Directors,
our team has continued to execute Tortilla's growth strategy
effectively, taking full advantages of opportunities as they arose
and conducting all activity with kindness, integrity and
ownership.
We focus on hiring the best people
at all levels and work hard to propagate our strong culture and
values throughout the organisation.
Our Board and senior Management
team regularly visit stores and speak with teams and guests to
ensure a strong connection between corporate objectives and
on-the-ground practice.
Cost effective hiring model
The simplicity of Tortilla's food
means that recipes and methods are straightforward, and managers
can train those with limited experience to high levels of
competency within a short time period. We can therefore focus on
hiring those with the values and behaviour we seek, enabling us to
maintain our culture and avoid the negative impact of the UK's chef
shortage.
This also helps us to hire from
within our stores' local communities, reducing travel time and cost
for employees. All stores strive to get to know their customers on
first name terms as part of the 'Raving Fans' initiative, and by
creating this 'independent' feel to each restaurant, we gain a
further competitive advantage.
Property portfolio and strategy
At the end of 2023, the Group had
87 sites worldwide: 69 UK sites we operate ourselves (66 Tortilla,
three Chilango), five UK sites franchised to SSP Group, five UK
sites franchised to Compass Group and eight franchised sites in the
Middle East. The Group's property portfolio is entirely
leasehold.
Within the UK, the Group's
portfolio of sites is well diversified with respect to locations,
with 33 sites within the M25 area and 36 sites outside of it. Three
of Tortilla's top ten stores (by profit) are located outside of the
M25. As customers of fast-casual operators tend to be primarily
impulsive purchasers, sourcing locations with high footfall is a
critical part of boosting brand awareness and generating
sales.
Tortilla's property portfolio
The Group's success is driven by
our proven property strategy with flexibility across site locations
and formats. We generally target locations ranging from 60 square
metres to 200 square metres, with the exception of our
delivery-only kitchen site, which operate in 25-35 square metres.
The estimated capital expenditure per site (excluding delivery-only
kitchens) ranges from £375,000 to £475,000 (excluding landlord
contribution) depending on the size of the unit, site condition and
store front requirements.
The Group aims for a 30% minimum
target investment hurdle for its return on capital employed. Our
sites are primarily located in high street areas, residential
locations, shopping centres and transport hubs as these high
footfall locations provide seven-day trade with lunch and dinner
availability, helping the brand appeal to a wider range of
consumers and trade throughout the day.
New sites
New sites have historically been a
core driver of Tortilla's development. Tortilla opened eight sites
in 2014, and five/six sites per year in 2015, 2016 and 2019, but
slowed this rollout in 2017 and 2018 as rents did not provide the
necessary value at that time. Understandably, site openings slowed
in 2020 but we accelerated our pipeline by opening seven sites in
2021 (four bricks and mortar and three delivery kitchens) along
with two new SSP Group franchise units. 2022 was a record year for
growth with a total of 18 additions to the estate. Growth continued
in 2023 with the addition of 6 Tortilla sites, and one SSP Group
franchise unit.
New sites will continue to play a
key role in our targeted growth trajectory. Tortilla has a
specialised property team that supports our growth with a rigorous
new site process including site selection, assessment, contract
negotiation and fitting. We also have a dedicated operations team
that relocates to new sites to ensure that new staff are adequately
trained and are supervised appropriately before they manage the
site themselves. The Board see the strategic merit in
accelerating our growth through existing and new franchising
partnerships and are evolving the mix of
new openings to focus more heavily on franchising whilst we take a
more targeted approach on the rollout of own stores, focusing on
Grade A locations where the brand has high awareness. We will open
at least eight sites in 2024, compared to twelve previously guided.
We are still in line with our IPO growth aspiration, having doubled
our rollout commitment in 2022.
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.
2.8 Employee
benefits
Short-term benefits
Salaries, wages, paid annual leave
and sick leave, bonuses and non-monetary benefits are accrued in
the period in which the associated services are provided by
employees of the Group.
Defined contribution plan
Contributions to defined
contribution schemes are charged to the consolidated statement of
comprehensive income in the year to which they relate.
2.9 Share-based payments
A transaction is accounted for as
a share-based payment where the Group receives services from
employees and Directors and pays for these in shares or similar
equity instruments.
The Group makes equity-settles
share-based payments to certain employees and Directors.
Equity-settled share-based schemes are measured at fair value
(excluding the effect of non-market-based vesting conditions) at
the date of grant, measured by use of an appropriate valuation
model.
The fair value determined at the
grant date of the equity-settled share-based payment is recognised
as an expense in the statement of comprehensive income on a
straight line basis over the vesting period.
The vesting is dependent on
achievement of specific performance conditions for the 2023, 2024
and 2025 financial years. The share-based payment expense will be
modified if it is determined that these performance conditions will
not be met.
Share options are forfeited when
an employee ceases to be employed by the Group unless determined by
the board to be a 'Good Leaver'. A participant who ceases
employment by reason of death, injury, ill-health or disability is
also deemed a good leaver.
2.10 Current and deferred tax
Tax is recognised in profit or
loss except that a charge attributable to an item of income and
expense recognised as other comprehensive income or to an item
recognised directly in equity is also recognised in other
comprehensive income directly in equity respectively.
The current income tax charge is
calculated on the basis of tax rates and laws that have been
enacted or substantively enacted by the balance sheet date in the
countries where the Group operates and generates income.
Deferred tax balances are
recognised where the carrying amount of an asset or liability in
the consolidated statement of financial position differs from its
tax base, except for differences arising on:
·
the initial recognition of goodwill;
·
the initial recognition of an asset or liability
in a transaction which is not a business combination and at the
time of the transaction affects neither accounting or taxable
profit; and
·
investments in subsidiaries and jointly
controlled entities where the Group is able to control the timing
of the reversal of the difference and it is probable that the
difference will not reverse in the foreseeable future.
Recognition of deferred tax assets
is restricted to those instances where it is probable that taxable
profit will be available against which the difference can be
utilised.
The amount of the asset or
liability is determined using tax rates that have been enacted or
substantially enacted by the balance sheet date and are expected to
apply when the deferred tax liabilities or assets are settled or
recovered. Deferred tax balances are not discounted.
Deferred tax assets and
liabilities are offset when the Group has a legally enforceable
right to offset current tax assets and liabilities and the deferred
tax assets and liabilities relate to taxes levied by the same tax
authority on either:
·
the same taxable group company; or
·
different company entities which intend either to
settle current tax assets and liabilities on a net basis, or to
realise the assets and settle the liabilities simultaneously, in
each future period in which significant amounts of deferred tax
assets and liabilities are expected to be settled or
recovered.
2.11 Alternative performance measures
("APMs")
The Group has identified certain
measures that it believes will assist the understanding of the
performance of the business. These APMs are not defined or
specified under the requirements of IFRS. The Group believes that
these APMs, which are not considered to be a substitute for, or
superior to, IFRS measures, provide stakeholders with additional
useful information on the underlying trends, performance and
position of the Group and are consistent with how business
performance is measured internally.
The Group's APMs are: like for
like ("LFL") revenue growth/(decline), Adjusted EBITDA (Pre-IFRS),
Operating cash flow and net cash/(debt).
The Directors use Adjusted EBITDA
as a primary KPI in managing the business. This measure excludes
exceptional items, share option expenses and site pre-opening costs
and applies pre-IFRS 16 treatment of leases. The Directors believe
this measure gives a more relevant indication of the underlying
trading performance of the Group and is also the measure used by
the banks for the purposes of assessing covenant
compliance.
2.12 Intangible assets
Goodwill
Goodwill represents the difference
between amounts paid on the cost of a business combination and the
acquirer's interest in the fair value of the Group's share of its
identifiable assets and liabilities of the acquiree at the date of
acquisition. Subsequent to initial recognition, goodwill is
measured at cost less accumulated impairment losses. Goodwill is
tested for impairment on an annual basis.
Other intangible assets
Intangible assets are initially
recognised at cost. After recognition, under the cost model,
intangible assets are measured at cost less any accumulated
amortisation and any accumulated impairment losses. Amortisation is
charged so as to allocate their cost over their estimated useful
life on a straight line basis. Computer software assets have a
finite useful life, which is determined to be 3 years.
2.13 Property, plant and
equipment
Items of property, plant and
equipment are initially recognised at cost. As well as the purchase
price, cost includes directly attributable costs.
Depreciation is charged so as to
allocate the cost of assets less their residual value over their
estimated useful lives, using the straight-line method.
Depreciation is provided on the
following basis, which is reviewed at each balance sheet
date:
Short-term leasehold
property
- over the lease term
Plant and machinery
- over 5 years
Fixtures and fittings
- over 3 years
2.14 Leases
Right-of-use assets
The Group recognises a
right-of-use asset at the lease commencement date. Right-of-use
assets are initially measured at the same amount as the lease
liability, reduced for any lease incentive received. Subsequently,
right-of-use assets are amortised on a straight line basis over the
remaining term of the lease and are assessed for impairment at each
balance sheet date. The majority of leases are covered by the
Landlord and Tenant Act 1985 which gives the right to extend the
lease beyond the termination date. The Group expects to extend the
leases covered by the Landlord and Tenant Act 1985. This extension
period is not included within the lease term as the termination
date cannot be determined.
Lease liabilities
At the commencement date of the
lease, the Group recognises lease liabilities measured at the
present value of lease payments to be made over the lease term. The
lease payments include fixed lease payments less any lease
incentives receivable. In calculating the present value of lease
payments, the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the
lease is not readily determinable. Where the Group expects to
extend the leases covered by the Landlord and Tenant Act 1985, the
extension period is not included within the lease term as the
termination date cannot be determined and these are not reasonably
certain.
Subsequently, lease liabilities
are increased to reflect the interest cost on the liability and
reduced for the lease payments made, which are recognised on a
straight-line basis over the term of the lease. In addition, the
carrying amount of lease liabilities is remeasured if there is a
modification, for example a rent review or a change in the lease
term.
When a lease liability is
remeasured, the Group adjusts the carrying amount of the liability
to reflect the payments to be made over the revised term, which are
discounted at a revised discount rate. An equivalent adjustment is
made to the carrying value of the right-of-use asset, with the
revised carrying amount being depreciated over the remaining
(revised) lease term. Lease payments which are variable in nature
and are not linked to any index or rate are expensed in the period
to which they relate.
2.15 Impairment
Assets that are subject to
depreciation or amortisation are assessed at each balance sheet
date to determine whether there is any indication that the assets
are impaired.
For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there
are separately identifiable cash inflows which are largely
independent of the cash inflows from other assets or groups of
assets (cash- generating units). Each site is considered to be a
CGU in its own right.
Goodwill arising on the
acquisition of Chilango Ltd has been allocated to individual
cash-generating units based on the forecasted EBITDA expected to be
generated from each cash-generated unit at the date of
acquisition.
Other assets are tested for
impairment whenever events or changes in circumstances indicate
that the carrying amount may not be recoverable. An impairment loss
is recognised for the amount by which the asset's carrying amount
exceeds its recoverable amount. The recoverable amount is the
higher of an asset's (or CGU's) fair value less costs to sell and
value in use. Non-financial assets that have been previously
impaired are reviewed at each balance sheet date to assess whether
there is any indication that the impairment losses recognised in
prior periods may no longer exist or may have decreased.
2.16 Inventories
Inventories are initially
recognised at cost, and subsequently at the lower of the cost and
net realisable value. Cost comprises all costs of purchase, costs
of conversion and other costs incurred in bringing the inventories
to their present location and condition.
Inventories are measured on a
first-in-first-out basis.
2.17 Cash and cash equivalents
Cash is represented by cash in
hand and deposits with financial institutions repayable without
penalty on notice of not more than 24 hours. Cash equivalents are
highly liquid investments that mature in no more than three months
from the date of acquisition and that are readily convertible to
known amounts of cash with insignificant risk of change in value.
Payments taken from customers on debit and credit cards are
recognised as cash.
2.18 Valuation of investments
Investments in subsidiaries are
measured at cost less accumulated impairment. Income is recognised
from these investments only in relation to distributions receivable
from post-acquisition profits. Distributions received in excess of
post-acquisition profits are deducted from the cost of the
investment.
2.22 Financial risk
The Group's activities expose it
to a variety of financial instrument risks. The risk management
policies employed by the Group to manage these risks are detailed
below. The primary objectives of the financial instrument risk
management function are to establish risk limits and then ensure
exposure to risks remains within these limits.
Interest rate risk
The Group is exposed to interest
rate risk as the Group's borrowings have an interest rate of SONIA
plus a margin.
Commodity price risk
The Group is exposed to movements
in wholesale prices of food and drinks. The Group sources the
majority of its products in the UK, however there is the risk of
disruption to supply caused by Brexit, the Russian-Ukraine
conflict, and the Red Sea crisis. The Group always benchmarks any
cost changes and typically fixes prices for periods of between
three and six months.
Capital risk
The Group manages the capital
structure to ensure it will be able to operate as a going concern,
whilst maximising the return to shareholders. The Directors look to
optimise the debt-to-equity balance and may adjust the capital
structure by paying dividends to shareholders, returning capital to
shareholders, issue new shares or sell assets to reduce debt. The
Directors intend to maintain low net leverage levels as the Group's
operating cash flows are sufficient to fund the addition of new
restaurants to the portfolio.
Credit risk
The Group's credit risk is
attributable to trade and other receivables and cash with the
carrying amount best representing the maximum exposure to credit
risk. The Group places its cash only with banks with high-quality
credit standings. Trade and other receivables relate to day-to-day
activities which are entered into with creditworthy
counterparties.
Liquidity risk
Liquidity risk is the risk that
the Group may encounter difficulties in meeting its financial
obligations as they fall due. They may arise from the Group's
management of working capital, finance charges and principal
repayments on its debt.
The Group has access to a £10m
revolving credit facility held with Santander UK plc, of which £7m
is undrawn at the yearend. Of this undrawn amount, £2.5m has been
allocated to an ancillary facility, an overdraft, which was not
utilised at 31 December 2023.
The Directors regularly review
cash flow forecasts to determine whether the Group has sufficient
reserves to meet obligations and take advantage of
opportunities.
Maturity analysis
|
|
Within 1
year
|
1 to 2
years
|
2 to 5
years
|
More than 5
years
|
Total
|
|
|
£
|
£
|
£
|
£
|
£
|
|
31 December 2023
|
|
|
|
|
|
|
Trade and other
payables
|
9,749,505
|
-
|
-
|
-
|
9,749,505
|
|
Lease liabilities
|
5,804,285
|
5,548,013
|
13,630,276
|
18,373,748
|
43,356,322
|
|
Borrowings
|
-
|
-
|
2,949,021
|
-
|
2,949,021
|
|
|
15,553,790
|
5,548,013
|
16,579,297
|
18,373,748
|
56,054,848
|
|
1
January 2023
|
|
|
|
|
|
|
Trade and other
payables
|
9,110,069
|
-
|
-
|
-
|
9,110,069
|
|
Lease liabilities
|
5,740,772
|
5,469,318
|
13,870,702
|
19,454,295
|
44,535,087
|
|
Borrowings
|
-
|
-
|
2,930,481
|
-
|
2,930,481
|
|
|
14,850,841
|
5,469,318
|
16,801,183
|
19,454,295
|
56,575,637
|
2.23 Provisions for liabilities
Provisions are made where an event
has taken place that gives the Group a legal or constructive
obligation that probably requires settlement by a transfer of
economic benefit, and a reliable estimate can be made of the amount
of the obligation.
Provisions are charged as an
expense to profit or loss in the year that the Group becomes aware
of the obligation, and are measured at the best estimate at the
balance sheet date of the expenditure required to settle the
obligation, taking into account relevant risks and
uncertainties.
When payments are eventually made,
they are charged to the provision carried in the Statement of
financial position.
3. Critical accounting estimates and
judgements
The Group makes certain
judgements, estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on
historical experience and other factors, including the expectations
of future events that are believed to be reasonable under the
circumstances. Judgements that have been made by the directors in
the application of these accounting policies that fall within the
scope of IAS 1 paragraph 125 have been discussed below.
Determining the discount rate for IFRS 16
At the commencement date of
property leases the lease liability is calculated by discounting
the lease payments. The discount rate used should be the interest
rate implicit in the lease. However, if that rate cannot be readily
determined, which is generally the case for property leases, the
lessee's incremental borrowing rate is used. This being the rate
that the individual lessee would have to pay to borrow the funds
necessary to obtain an asset of similar value to the right-of-use
asset in a similar economic environment with similar terms,
security and conditions.
The Directors carried out a review
of the historic borrowing rates of the Group and historic bond
rates together with analysis of the lease terms. They concluded
that the use of a single discount rate applied to all leases signed
prior to 2 January 2022 is a reasonable approach. Based on this
analysis a discount rate of 3.4 percent has been applied.
Subsequently, discount rates have been applied on a lease-by-lease
basis, in order to reflect the increasing risk-free rate during
this period. These discount rates range from 4.9 percent to 7.3
percent.
For the lease liabilities at 31
December 2023 a 0.1 percent increase in the discount rate would
reduce the total liabilities by £11,000 (1 January 2023: £83,000),
which is not considered to be material. Therefore this is not
considered to be a key source of estimation uncertainty.
Impairment of goodwill, right of use assets and property,
plant and equipment
Goodwill, right-of-use assets and
property, plant and equipment are reviewed for impairment when
there is an indication that the assets might be impaired by
comparing the carrying value of the assets with their recoverable
amounts. The recoverable amount of an asset or cash generating unit
(CGU) is determined based on value-in-use calculations prepared on
the basis of the Directors' estimates and assumptions. Individual
sites are viewed as separate CGUs.
The key assumptions in the
value-in-use calculations include the growth rates of revenue and
expenses, together with the Group's weighted average cost of
capital (WACC), which is used as a discount rate. Projected cash
flows are based on financial budgets approved by the Board covering
a five year period. Beyond this five year period, projected cash
flows have been based on a 3.0% growth rate until the end of the
lease terms. The value-in-use calculations also factor in the cost
of maintaining the assets, set at £25,500 per annum for each site
based on historic averages, and the impact of direct overhead
costs.
For the leases held in Chilango
Ltd, a further key assumption in the value-in-use calculations was
that the leases with terms ending in less than five years would be
able to be renewed with terms of 10-15 years, in line with the term
lengths of leases held by Mexican Grill Ltd. If this assumption was
incorrect, the maximum potential impact on the impairment charge
for the 52 weeks ended 31 December 2023 is an increase of
£1,605,818.
An independent external
consultancy was engaged to calculate the Group's post-tax WACC. As
at 31 December 2023, the pretax WACC was determined to be 15.1% (1
January 2023: 13.1%). An increase in the discount rate of 1.0
percent would increase the impairment charge for the 52 weeks ended
31 December 2023 by £nil, which is not considered to be
material.
In the 52 weeks ended 31 December
2023, property, plant and equipment assets of £14,119,801 and
right-of-use assets of £2,624,886 have been tested for impairment.
Detailed impairment testing resulted in the recognition of an
impairment charge of £289,901 (52 weeks ended 1 January 2023:
£160,930) and an impairment reversal of £nil (52 weeks ended 1
January 2023: £368,953) against property, plant and equipment
assets (note 15) and an impairment charge of £nil (52 weeks ended 1
January 2023: £380,673) against right-of-use assets (note
13).
As these assumptions have a
significant risk of resulting in a material adjustment to the
carrying amounts of assets and liabilities within the next
financial year, these are considered to be key sources of
estimation uncertainty.
Useful economic lives of property, plant and
equipment
The depreciation charge is
dependent upon the assumptions used regarding the useful economic
lives of assets. A 10 percent increase in average useful economic
lives would result in a £346,000 decrease in depreciation in the 52
weeks ended 31 December 2023 (1 January 2023: £229,000). This is
not considered to be material and therefore this judgement is not
deemed to be a key source of estimation uncertainty.
Share-based payments
The charge for share-based
payments is calculated according to the methodology described in
note 8. The Black-Scholes model requires subjective assumptions to
be made including the volatility of the Company's share price, fair
value of the shares and the risk free interest rates.
The vesting of certain share-based
payments is dependent on the achievement of specific performance
and expansion targets over the three financial years 2023, 2024 and
2025. Assumptions have been made regarding the likelihood of these
criteria being met. A 25% increase in likelihood would result in a
£21,175 increase in share-based payment charge in the 52 weeks
ended 31 December 2023 (1 January 2023: £nil). This is not
considered to be material and therefore this judgement is not
deemed to be a key source of estimation uncertainty.
4. Revenue
|
|
|
52 weeks
ended
31 December
2023
|
|
52 weeks
ended
1 January
2023
|
|
|
|
£
|
|
£
|
|
Sale of goods
|
|
64,848,049
|
|
57,050,636
|
|
Franchise income
|
|
826,916
|
|
647,851
|
|
|
|
65,674,965
|
|
57,698,487
|
|
|
|
|
|
|
IFRS 8 Operating Segments requires
operating segments to be based on the Group's internal reporting to
its Chief Operating Decision Maker (CODM). The CODM is regarded as
the management team of the Chief Executive Officer and the Chief
Financial Officer.
The Group has three
segments:
•
UK sales from Group-operated
restaurants
•
UK franchise sales from franchised
restaurants
•
Middle East franchise sales from franchised
restaurants
The franchise aspects of the
business have a minimal cost and asset base and therefore they are
not considered to be material and separable segments. There are
similar economic characteristics between the franchise aspects and
the Group-operated restaurant business, with each following a
similar sales and EBITDA trajectory. These have been reviewed by
the Directors along with the non-financial criteria of IFRS 8. It
is the Directors' judgement that despite some short-term
variability, all segments have similar economic characteristics in
the medium and long-term and meet the criteria for aggregation into
a single reporting segment. Therefore, no segmental analysis is
provided.
5. Operating profit
|
The operating profit is stated
after charging/(crediting):
|
|
|
|
|
|
52 weeks
ended
31 December
2023
£
|
|
52 weeks
ended
1 January
2023
£
|
|
Depreciation and amortisation
|
8,155,814
|
|
6,194,997
|
|
Impairment of right-of-use
assets
|
-
|
|
380,673
|
|
Loss on disposal of fixed
assets
|
40,746
|
|
17,780
|
|
Impairment of fixed assets
|
289,901
|
|
160,930
|
|
Reversal of impairment of fixed
assets
|
-
|
|
(368,953)
|
|
Variable lease payments
|
692,886
|
|
969,880
|
|
Inventories - amounts charged as
an expense
|
14,883,204
|
|
13,605,825
|
|
Share option expense
|
387,443
|
|
362,028
|
|
Pre-opening costs**
|
344,570
|
|
813,154
|
|
Exceptional items*
|
437,756
|
|
542,140
|
|
Bank arrangement fee amortisation
|
18,540
|
|
18,538
|
|
Auditors' remuneration:
|
|
|
|
|
Audit fees
|
138,400
|
|
120,000
|
|
Other assurance services
|
9,700
|
|
14,000
|
|
|
|
|
|
*Exceptional items in 2022
includes £415,908 of costs incurred in relation to the acquisition
of Chilango Ltd.
|
|
|
|
|
|
|
52 weeks
ended
31 December
2023
£
|
|
52 weeks
ended
1 January
2023
£
|
|
Pre-opening costs
|
344,570
|
|
813,154
|
|
Number of sites openings in
period
|
6
|
|
18
|
** The Group reports costs
incurred prior to the opening of a site as a separate expense and
excludes these from the calculation of Adjusted EBITDA (a non-GAAP
measure). This approach is in line with the standard industry
practice and the methodology used by the Group's bank for the
purposes of assessing covenant compliance. The Directors view this
as a better way to analyse the underlying performance of the Group
since it excludes costs which are not trading related.
6. Employees
The average monthly number of
employees, including the directors, during the period was as
follows:
|
|
|
|
|
|
|
|
31 December
2023
No.
|
|
1 January
2023
No.
|
|
|
Operations staff
|
1,094
|
|
1,093
|
|
|
Head office staff
|
52
|
|
51
|
|
|
|
1,146
|
|
1,144
|
|
The average monthly number of
employees, including the Directors, during the period was as
follows:
|
|
|
|
|
|
|
31 December
2023
£
|
|
1 January
2023
£
|
|
Wages and salaries
|
19,634,665
|
|
16,998,678
|
|
Social security costs
|
1,164,438
|
|
1,007,144
|
|
Pension costs
|
220,650
|
|
190,987
|
|
Share based payments (note
8)
|
387,443
|
|
362,028
|
|
|
21,407,196
|
|
18,558,837
|
|
Directors' remuneration, included
in staff costs, was as follows:
|
|
|
|
|
|
|
|
|
|
|
31 December 2023
£
|
|
1 January
2023
£
|
|
Short-term employee benefits
|
585,205
|
|
511,677
|
|
Post-employment
benefits
|
2,643
|
|
3,485
|
|
|
587,848
|
|
515,162
|
7. Director's remuneration and key management
information
The highest paid director received
remuneration of £231,000 (2022: £215,000).
The number of Directors receiving
pension contributions was 2 (2022: 2).
The share-based payment expense
arising from the Directors' participation in the Company's LTIP
scheme was £219,000 (2022: £240,984).
There are no Key Management
Personnel other than the Directors. Further information about the
remuneration of individual Directors is provided in the
Remuneration report.
8. Share based payments
A transaction is accounted for as
a share-based payment when services are paid for in shares or
similar equity instruments.
The Group issues equity-settled
share-based payments to Directors and certain members of staff.
Equity-settled share-based schemes are measured at fair value at
the date of grant, using the Black Scholes valuation model. The
expected life used in the model is adjusted, based on Management's
best estimate, for the effects of non-transferability, exercise
restrictions and behavioural considerations.
The fair value determined at the
grant date of the equity-settled share-based payments is expensed
on a straight-line basis over the vesting period, based on the
Group's estimate of shares that will eventually vest.
The Tortilla Mexican Grill plc Long-Term Incentive Plan 2021
("LTIP")
Under the LTIP, options were
awarded to Directors and members of the senior management team. 50
percent vests after three years and the remaining 50 percent vests
after the fourth year. The vesting is dependent on achievement of
specific Adjusted EBITDA targets for the 2023 and 2024 financial
years. The Adjusted EBITDA target for 2023 has been met, and the
target for 2024 is expected to be met.
In the 52 weeks ended 1 January
2023, 205,714 nil cost options were awarded under the LTIP to
Directors which will vest on 1 December 2024. The vesting is
dependent on the Directors' continuous employment.
In the 52 weeks ended 31 December
2023, 600,387 nil cost options were awarded under the LTIP to
Directors and members of the senior management team which will vest
on 10 May 2026. The vesting of the awards made to Directors is
dependent on achievement of specific performance targets over the
three financial years 2023, 2024 and 2025, as well as the
Directors' continuous employment. The vesting of the awards made to
members of the senior management team is dependent on continuous
employment only.
Awards are forfeited if the
employee leaves the Group before the awards vest, except under
circumstances where the employee is considered a 'Good
Leaver'.
Details of the share awards
outstanding are as follows:
|
|
31 December 2023
Number of share options
#
|
|
31 December 2023 Weighted
average exercise price
£
|
|
1 January
2023
Number of share options
#
|
|
1 January
2023
Weighted average exercise
price
£
|
|
Outstanding at beginning of the
period
|
1,946,046
|
|
1.6
|
|
1,809,393
|
|
1.8
|
|
Granted during the period
Exercised during the period Forfeited during the period
|
600,387
-
(300,442)
|
|
-
-
1.8
|
|
205,714
-
(69,061)
|
|
-
-
1.8
|
|
Outstanding at the end of the period
|
2,245,991
|
|
1.2
|
|
1,946,046
|
|
1.6
|
The awards outstanding at the end
of 31 December 2023 have a remaining weighted average contractual
life of nineteen months (1 January 2023: two years) and an exercise
price of £1.16 (1 January 2023: £1.62). No awards were exercisable
at the end of the period (1 January 2023: none).
The Group recognised total
expenses related to the above equity-settled share-based payment
transactions in the form of options during the 52 weeks ended 31
December 2023 of £369,021 (1 January 2023: £362,028) and related
employer National Insurance of £18,422 (1 January 2023:
£9,988).
The fair values were calculated
using a Black Scholes model. The inputs used for fair valuing
awards granted during the period was as follows:
|
|
|
|
|
|
|
31
December
2023
|
|
1 January
2023
|
|
|
Share price at grant date
(pence)
|
107p
|
|
87p
|
|
|
Exercise price (pence)
|
-
|
|
-
|
|
|
Expected volatility (%)
|
56%
|
|
90%
|
|
|
Option life (years)
|
3.0
|
|
2.0
|
|
|
Risk free interest rate
(%)
|
3.88%
|
|
3.57%
|
|
|
|
|
|
|
|
|
|
In the absence of any historical
volatility data for Tortilla Mexican Grill plc, the expected
volatility was determined by reviewing the volatility of the share
price of similar entities which are currently traded on
AIM.
9. Interest receivable
|
|
|
|
|
|
|
52 weeks ended
31 December 2023
£
|
|
52 weeks ended
1 January 2023
£
|
|
Bank interest income
|
31,900
|
|
1,384
|
10. Interest payable and similar expenses
|
|
52 weeks ended
31 December 2023
£
|
|
52 weeks ended
1 January 2023
£
|
|
Bank interest payable
|
269,491
|
|
185,323
|
|
Finance cost on lease liabilities
|
1,531,685
|
|
1,280,739
|
|
|
1,801,176
|
|
1,466,062
|
11. Taxation
|
|
52 weeks ended
31 December 2023
£
|
|
52 weeks ended
1 January 2023
£
|
|
Current tax
|
|
|
|
|
Adjustments in respect of previous
periods
|
(610,319)
|
|
(290,327)
|
|
Total current tax
|
(610,319)
|
|
(290,327)
|
|
Origination and reversal of timing
differences
|
617,696
|
|
-
|
Factors affecting tax charge for the period
The tax assessed for the period
differs from the standard rate of corporation tax in the UK of 25%.
The differences are explained below:
|
|
52 weeks ended
31 December 2023
£
|
|
52 weeks ended
1 January 2023
£
|
|
Loss on ordinary activities before
tax
|
(1,085,166)
|
|
(928,549)
|
|
Profit on ordinary activities
multiplied by standard rate of corporation tax in the UK of
25% (2022 - 19%)
|
(271,292)
|
|
(176,424)
|
|
Effects of:
|
|
|
|
|
Expenses not deductible for tax
purposes
|
91,098
|
|
109,211
|
|
Depreciation in excess of capital
allowances
|
608,059
|
|
721,889
|
|
Movement in tax losses
|
60,138
|
|
(683,653)
|
|
Other timing differences,
primarily arising from operating lease accounting
|
129,693
|
|
28,977
|
|
Adjustments to tax charge in
respect of prior periods
|
(610,319)
|
|
(290,327)
|
|
Total tax charge for the period
|
7,377
|
|
(290,327)
|
At 31 December 2023, the Group had
unused carried forward tax losses of £3,307,448 (1 January 2023:
£3,548,435) which are expected to be fully utilised in future
periods. From 1 April 2023, the UK corporation tax rate increased
to 25% Accordingly, the rate used to calculate the deferred tax
balances at 31 December 2023 is 25% (1 January 2023:
25%).
12. Earnings/(loss) per share
Basic earnings/(losses) per share
is calculated by dividing the profit/(loss) attributable to equity
shareholders by the weighted average number of shares outstanding
during the period.
|
|
|
|
|
|
|
|
31 December
2023
£
|
|
1 January
2023
£
|
|
|
(Loss)/profit used in calculating
basic and diluted profit
|
(1,092,543)
|
|
(638,222)
|
|
|
Weighted average number of shares
for the purpose of basic and diluted earnings per share
|
38,664,031
|
|
38,664,031
|
|
|
Basic and diluted (loss)/earnings
per share (pence)
|
(2.8)
|
|
(1.7)
|
|
|
|
|
|
|
|
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.
13. Leases
|
Right-of-use assets
|
|
£
|
|
Lease liabilities
|
|
£
|
|
|
|
|
|
|
|
|
|
At
2 January 2022
|
|
24,939,614
|
|
At
2 January 2022
|
|
(31,662,090)
|
|
|
|
|
|
|
|
|
|
Additions
|
|
8,459,288
|
|
Additions
|
|
(8,459,288)
|
|
Disposals
|
|
(996,353)
|
|
Arising on acquisition
|
|
(2,671,192)
|
|
Impairment
|
|
(380,673)
|
|
Interest expense
|
|
(1,280,739)
|
|
Arising on acquisition
|
|
2,671,192
|
|
Lease payments
|
|
6,353,067
|
|
Depreciation
|
|
(3,657,710)
|
|
Disposals
|
|
996,353
|
|
|
|
|
|
|
|
|
|
At
1 January 2023
|
|
31,035,358
|
|
At
1 January 2023
|
|
(36,723,889)
|
|
|
|
|
|
|
|
|
|
Additions
|
|
3,682,001
|
|
Additions
|
|
(3,682,004)
|
|
Arising on acquisition
|
|
-
|
|
Interest expense
|
|
(1,531,685)
|
|
Disposals
|
|
(851,987)
|
|
Lease payments
|
|
5,881,752
|
|
Depreciation
|
|
(4,344,878)
|
|
Disposals
|
|
851,987
|
|
|
|
|
|
|
|
|
|
At
31 December 2023
|
|
29,520,494
|
|
At
31 December 2023
|
|
(35,203,839)
|
Carrying amount by maturity of the Group lease
liabilities
|
|
Within 1
year
|
1 to 2
years
|
2 to 5
years
|
Over 5
years
|
More than 1
year
|
Total
|
|
£
|
£
|
£
|
£
|
£
|
£
|
|
31 Dec 2023
|
5,670,902
|
5,195,183
|
11,769,439
|
12,568,315
|
29,532,937
|
35,203,839
|
|
1 Jan 2023
|
5,614,340
|
5,147,757
|
12,129,224
|
13,832,570
|
31,109,551
|
36,723,891
|
The Group has 33 (2022: 31) lease
contracts that include variable lease payments in the form of
revenue-based rent top-ups. The Group also has certain leases with
lease terms of 12 months or less. The Group applies the 'short-term
lease' and 'lease of low-value assets' recognition exemptions for
these leases. In the 52 weeks ended 31 December 2023, the total
expense arising from variable lease payments amounted to £692,886
(52 weeks ended 1 January 2023: £969,879).
The majority of leases are covered
by the Landlord and Tenant Act 1985 which gives the right to extend
the lease beyond the termination date. The Group expects to extend
the leases covered by the Landlord and Tenant Act 1985, however
this extension period is not included within the lease term for the
purposes of calculating the above lease liabilities because the
termination date cannot be determined and these are not reasonably
certain.
14. Intangible
assets
|
|
Computer
Software
|
Goodwill
|
Total
|
|
|
£
|
£
|
£
|
|
|
|
|
|
|
Cost
|
|
|
|
|
|
|
|
|
|
At 3 January 2022
|
-
|
-
|
-
|
|
Arising on acquisition
|
24,600
|
2,624,886
|
2,649,486
|
|
Disposals
|
(9,100)
|
-
|
(9,100)
|
|
At 1 January 2023
|
15,500
|
2,624,886
|
2,640,386
|
|
At 31 December 2023
|
15,500
|
2,624,886
|
2,640,386
|
|
|
|
|
|
|
Amortisation
|
|
|
|
|
At 3 January 2022
|
-
|
-
|
-
|
|
Amortisation charge
|
10,456
|
-
|
10,456
|
|
On disposals
|
(2,275)
|
-
|
(2,275)
|
|
At 1 January 2023
|
8,181
|
-
|
8,181
|
|
Amortisation charge
|
5,166
|
-
|
5,166
|
|
At 31 December 2023
|
13,347
|
-
|
13,347
|
|
|
|
|
|
|
Net book value
|
|
|
|
|
|
|
|
|
|
At 31 December 2023
|
2,153
|
2,624,886
|
2,627,039
|
|
At 1 January 2023
|
7,319
|
2,624,886
|
2,632,205
|
|
|
|
|
|
|
|
|
|
|
|
Goodwill
In the 52 weeks ended 1 January
2023 goodwill of £2,624,886 was recognised on acquisition of
Chilango Ltd. Each site is considered to be a separate CGU for
impairment purposes and therefore the goodwill was allocated to
individual sites. The goodwill allocation was based on the
forecasted EBITDA that was expected to be generated from each site
at the time of acquisition:
|
|
Goodwill
£
|
|
Brewer Street
|
334,647
|
|
Brushfield Street
|
171,507
|
|
Chancery Lane
|
117,126
|
|
Croydon
|
104,577
|
|
Islington
|
466,414
|
|
London Bridge
|
543,801
|
|
London Wall
|
363,928
|
|
Manchester
|
522,886
|
|
|
2,624,886
|