Tortilla Mexican Grill (LSE:MEX) — Annual Results investor Presentation

0:01 Good afternoon, ladies and gentlemen, and welcome to the TORTILLA MEXICAN GRILL PLC annual results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please simply type in your questions at any time and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company will review all of the questions submitted today and publish responses where it's appropriate to do so. Before we begin, I would like to submit the following poll. And if you'd give that

0:32 your kind attention, I'm sure the company would be most grateful. And I'd now like to hand you over to CEO, Richard Morris, and CFO, Andy Naylor. Good afternoon. Good afternoon. Thank you. Hello, everybody. Thank you for joining us.

0:45 I'll kick straight off with the presentation. Mandy and I have a quick couple of minutes to introduce ourselves, who we are. So first of all, my name is Richard Morris. I'm the CEO of TORTILLA and have been since 2014. My background has been very much always in hospitality starting back in the early days as a as a kid at McDonald's, and then I I went to work for Whitbread for eight years when TGI Fridays landed in The UK, so

1:15 quite some time ago. I then did spend some time in The States with Rainforest Cafe and then was part of the original management team at Block Fine Restaurants from '99 to 2010. And then I joined TORTILLA twenty fourteen having spent a couple of years with Dales for the organic. I felt that the, fast service restaurant, quick service restaurants was, was definitely on the rise back in those days, and I felt that casual dining was going to become slightly overheated and a bit more challenging. And nothing has happened that has changed my view on that, and, I'm very happy to be, talking to you today about, what's been a very successful eight years for the business. Good afternoon. I'm Andy. I'm the CFO at TORTILLA I started my career at Deloitte doing the kind of classic ACA route. I have always been a always been a numbers guy, did a physics degree, so clearly love numbers a lot. I spent a lot of time working really with oil and gas and energy businesses there, AIM and FTSE listed, so I got some good PLC experience.

2:20 And then decided I wanted to something a bit more tangible. That's why I mean, I love eating out, so I joined Gout Show, and that's well, spent about four years there. It was a nice break from talking about energy and derivatives and those sorts of things. Sold the business to Equistone while I was there, and then I moved on to TORTILLA. I've been here for five years. And Rich and I have been exploring, obviously, lots of new opportunities for the group in recent years as well, which we're gonna talk a bit about later. Okay. So introduction and highlights, just to talk you through. I've envisaged this presentation as about half an hour. And then obviously, we hopefully will have questions from you guys. We would like to believe we'll probably answer. We'd like to think we'll answer a lot of your questions as we go through the presentation. But, anyway, by all means, send them through, and then we'll look forward to taking them at the end.

3:15 Andy will do a financial review for you. I'll talk about our strategy and operational review of last year and the first quarter of this year and then the outlook of how we see the sector and and what's been going on in the sector. Clearly, an awful lot right now, and we'll hopefully try and allay your concerns about the hospitality sector, which has certainly come up with some fire over the last couple of years. So first of all, a bit of background on TORTILLA. We're the largest and most successful fast casual Mexican restaurant business in The UK, which is which is great. We're now up to 68 sites worldwide, and the business was founded in 2007 by a, San Francisco guy called Brandon Stevens, who used to was born and bred on burritos and tacos in the Mission District in San Francisco.

4:04 Came over to London Business School to do a thesis, realized how dreadful Mexican food was in London back in 2007,

4:13 and actually did a thesis on Mexican food. And, wonderfully, he kind of lived out his dream and opened, his first TORTILLA in 2007 in Islington. And the rest, as they say, is history. We're now at 68 sites around the world. One of the key pillars you will hear us talk about a lot in this presentation and why we've been so successful and are very excited about the future is around value for money. Even more important now as the world enters another difficult phase, people love eating out, but they definitely do start to look at trading down when things are tough. So So we think we're well placed to to benefit from that. The business has been consistently successful since its inception, and sales have grown year on year since 2007.

5:03 Have a great central production kitchen, which allows us to to grow the business quite quickly now as that produces 70% of our menu items from a central location. And we also have a head office that's now set for growth. And we'll talk through the future opportunities for us. And one of the key reasons for doing an IPO and becoming a listed business is we wanted to get the access to cash, and we wanted to make the most of the opportunities that COVID has definitely thrown our way.

5:39 So for the highlights of last year, we were able to add seven new sites to our estate during this time, bringing our total number to 64 at the end of last year. We opened three new sites in Exeter, Windsor, and Edinburgh and three delivery kitchens in Ballon, Brent and Brent Cross and Manchester. And we also entered a new partnership with Merlin Entertainment, and opened we our first site with them at Chessington World Of Adventures in April of last year, and that was very successful. And we've just reopened it again for this for this summer. And we also expanded our partnership with SSP by opening one in Gatwick Airport at the back end of last year and Skelton Lakes, which is a motorway service station, Both testing sites for us in terms of seeing whether we worked in airports, seeing whether we work in service stations, and they've been very successful. Gatwick Airport is now doing £50,000 a week, which is fantastic.

6:41 As the airlines have opened up and the airports have opened up, we're really pleased with how well that's performing. That follows on from opening changing one of their original Mexican sites in Houston Station, which was a business called MYCASA, which frankly wasn't very good, and they were keen to change that brand to TORTILLA. And we took that site in Houston Station that was doing $7 a week, and we're now doing over £20,000 a week there. So, again, relationship with SSP is very good, and we're very excited about the future event.

7:18 Our own company sites, we're we will open 45 sites over the next five years. This year, we are already pretty much locked and loaded for the nine locations that we've agreed to do. So our pipe for sites for 2022 is is looking very strong, we're already starting to load up for 2023 and beyond. The property market has no doubt been in our favor since COVID, and we'll go into that in a little bit more detail as we as we go through the presentation. Andy will go into more detail on the financials, but the headline numbers for us last year were transformational for this business. We took our revenues up to 48,100,000, whereas in '20, we were at 26.8, and 2019, 35 and a half.

8:07 Phenomenal, sales line for us despite all the various COVID related closures. Our like for likes versus 2019 were at plus 23.8, and even allowing for the VAT benefit. That's still just under 12% like for like for that period. So we definitely benefited from the challenges that COVID presented. Our EBITDA number was 8,700,000 against full year 20 of two point four and 2.5 in 2019. So a huge change of which, obviously, there was some government benefit in there. But even so, a wonderful year for us and a year that allowed us to introduce our brand to an awful lot of people that probably would not have had the opportunity of eating tortilla or would not have chosen to eat with us.

8:55 And I think, again, as we go through, you'll see that we're not just a COVID success. There's there there was success pre COVID, and we've continued to trade very strongly since COVID. We have a very strong balance sheet now, which is great, which means we're able to grow the business out of cash. And whereas a lot of our competitors and other businesses in the sector are licking their wings and rebuilding their balance sheets, we're putting our foot down and taking full advantage of the market in in this current situation.

9:28 Okay. So onto onto some numbers to build on what Richard briefly outlined. We obviously had a fantastic year last year. That sales growth of nearly 80% came from three areas really, new sites that we added during the year, strong underlying like for likes in our existing estate and also just less restrictions on the business in 2021 and 2020. I say only, but we only lost two eighty five weeks of trade last year, which represented about 11% of the total possible the year before we lost around 33%. So those three factors combined to a transformational year. The like for likes are fantastic. I've got more on those on the next slide, so I won't dwell on that too long here.

10:16 Gross profit margins were very strong, and that's because some operational efficiencies that we introduced to the business as part of the during the pandemic. It's funny people often say, as of the crisis, sometimes some positive changes come, and we really refined some of our ordering and cooking procedures during the pandemic to make sure that we were absolutely minimizing wastage. Administrative expenses increased during the period significantly. Obviously, as we were open for longer, we had more staff employed and current delivery commissions. The key metric for us is our adjusted EBITDA as a percentage of sales, which is around 18% for 2021. That's not what the normal run rate will be going forwards. I would estimate once you strip out government support in the world as a normal place would be around sort of 12% mark, which is very healthy in our sector.

11:09 Profit before tax increased to just over 3,000,000. And obviously, we're going to hopefully have many more years of delivering some very strong profits going forward. Now on to a bit more information around sales, which is a bit more detailed. I'm sure some of you were were part of our presentations previously and will be familiar with this, but the bar chart is is a particularly interesting one because what it shows you is the light the average weekly sales towards here LA MEXICAN you can see in January 20 and February 20, we were doing around GBP 7 and 50,000,800,000 of sales a week. Most of that coming in store, the Gold Bars delivery, so that was around 16%, 17% of sales.

11:57 We shut our sites in April or late March, in fact, and then we began reopening in May, which was the best decision we ever made. We were very encouraged by how well we traded when we reopened. And so we really accelerated the reopening to get ahead of our competitors. And by doing that, we really introduced our product to a lot of new people. And you can see, incredibly, by the time the summer came around, our sales were pretty much back to the level they were pre COVID, around GBP 800,000 a week. And they stayed at that level pretty much thereafter with a bit of a dip in January and February because, again, the government introduced restrictions and lockdowns. Things reopened on the April 12. That was what the nonessential retail day that reopened, And our numbers went from strength from strength from that. And that just goes to show that those customers that we acquired remained loyal to us.

12:47 They like our products, and they continue to order it, whether that be via delivery or in store or takeaway. Like for likes were fantastic. And in fact, if you back out the period prior to the April 12, our like for like sales growth increases to over 30%, and that compares to an industry benchmark of just over 1%. So fantastic profits and also very strong spread of profit across The UK, which is incredibly important in a rollout story like TORTILLA across The UK, where you want confidence in your brand to be able to deliver outside of the M25. So that gives us lots of expansion confidence

13:25 for our plans. We make three we average $350 inside the M25 and £300,000 outside the M25, so very strong performance nationwide. And then lastly, there's a little line graph that just shows you in the bottom right corner our like for like sales growth compared to our competitors, and you can see that we're always maintaining a very healthy differential. So moving on to the balance sheet, just quickly on this. The only real headline news stories here are, obviously, the IPO brought in some additional funds. So we brought in GBP 5,000,000 of gross funds, which was more than an offset enough to offset the costs associated with that transaction. And that's given us additional liquidity for us going forward. We also then did a refinancing of our debt facilities.

14:12 So we've only got GBP 3,000,000 of drawn debt. We've got a total GBP 10,000,000 facility available, so there's 7,000,000 undrawn, which we can access should we need. And actually, this is a highly generative cycle. We get cash in immediately from customers, power supplies later. So actually, we can self fund our rollout plans, which I think is incredibly important in a world where we want to keep low leverage levels.

14:42 I'm sure these areas are areas that you would have brought up or will bring up as part of the questions. This is what we're seeing in the news right now, following on from all the other challenges and now with the the war in Ukraine, and that's added some some other areas, which Andy will go into. I'll just talk to you a little bit about the labor market in The UK. Again, you'll have seen and read a lot about the challenges that, that has presented for the hospitality sector and other sectors. The reality is that, yes, it's true. There's no doubt that this is a business that relied heavily on immigration, and a lot of our employees were non UK. That's the same for everybody in this sector. So it has been a challenge, but the but the the difference for us is this is a business that's we've we've spent a lot of time making sure that the businesses are as simple as they possibly can be.

15:38 I mentioned earlier about the central production kitchen that produces 75% of our food. So when the food arrives in the stores, they're generally just regenerating the products, reheating the marinated meats and the beans, and just producing three or four of our salsas, which are beautiful, wonderful products. They're very, very simple to produce. So the end result of all of that is we do not need skilled staffing in our businesses. We are able to recruit from the market that now is the seventeen, eighteen year olds, that that market is is fine for us. Yes. There are different challenges of employing younger people like that. You have to kinda hold their hands a little bit longer and help them. But fundamentally, it's not a difficult business to operate.

16:26 It's very busy and physically quite tiring. But, actually,

16:30 the benefits for young people working for us are, a, that we generally are in city centers, so travel to and from our restaurants is very simple for them. Public transport is generally very good. We don't trade late into the evenings, so there's no fear or concerns of traveling around after the pubs have kicked out and things get a bit messy. So they're able to be gone and and probably home by ten, 10:30 if they're working in the evenings. That's a big plus. They love our product because it's great fun, and it's a little bit different, and it's very customizable. And the people that work in our restaurants are the same demographic pretty much as the people who eat in our restaurants. Our demographic is around their age group, up to 30, 30, 35 year olds, so they're serving people who are similar demographic to themselves.

17:19 We offer various perks to work for us, which we think are really good. They get discounts in local businesses, and they're fun places to work. You know? Yes. It's quite quite tough and when we're busy, but it's good. And it's a place that they feel comfortable in. We've opened a couple of restaurants last year, one in Windsor specifically. Windsor is a is a town with no university, and we opened that business with a load of 17, 18 year olds, and it's been fine. So it that's the market that that that's out there. And for us, it means that we are able to continue to to open our sites with those people running them for us. And in terms of the other two hot topics at the moment other than labor, utilities is an interesting space.

18:08 We've so far had a successful strategy. We didn't lock in our supply in November, October last year when things were at an all time high. Now that has saved us money so far, although the markets have since gone up again since. So it does remain to be seen where that will land. But it is important to say that we actually have very little utility costs compared to other restaurant businesses. And before all these increases, we were around 1.5% of sales on utilities. And we're aware that the common sort of threshold for a lot of other bigger businesses would be to near be near a 3% of sales. So with things doubling, our doubling is less doubling than everyone else's. So we feel pretty well protected on that front. We made lots of allowances for inflation in our numbers when we did our work last year. And the same with our supply contracts as well on food. We've taken some mitigating steps so far this year that has meant that we've not had any price increases.

19:07 And we're pretty confident that we've been able to mitigate a lot of the increases that might come out of the Ukraine situation by making changes to our supply chain without altering what we do necessarily. So we're pretty we're pretty bullish on our ability to convert the profit level as well this year.

19:31 And then just to touch very quickly on something that we wanted to put into the presentation because we feel it's extremely important with people predicting that inflation may hit 8% in April. We are very well priced. You can see in the graph there compared to a lot of our competitors. We are very well priced. And we do believe that if there is a downturn in consumer confidence, etcetera, that people will down favor the sort of good value for money businesses more than the more expensive ones that are seen as a bit more of a treat. We know that good value is important for our customers. We surveyed three and a half thousand of them a little over a year ago, and we know that for them, more than 50% list good value has been a key part of their decision making. So we feel like we're in a bit of a sweet spot price point wise compared to our competitors, and we feel like that will put us in good stead over the course of this year and beyond.

20:34 Okay. So current trading, first quarter this year, again, pretty encouraging. January was tough, but still the remnants of Omnicron around, and January generally is, is a bit miserable. But, actually, you know, it was okay. February and March have been fine, and we have, continued to trade in line with our expectations. And more than that was you know, we wouldn't have expected, especially with all the various challenges that are that are that are sitting around us at the moment even as we move back into a post

21:11 COVID world. We anticipated twelve months ago that delivery would fall back down to circa 35%, 38% once normalized trading occurred and the world was a normal place again.

21:25 And that's pretty much been proved correct. We are at about 35% of our sales, maybe slightly more than that. Whether they continue to go back up or stay where they are, we don't know. But one thing that's very key with this business, unlike a lot of other restaurants, is that delivery for us contains and and Andy's mentioned this before, but there's profit parity with a delivered product for TORTILLA. So we're able to charge more on on delivery for our product, which offsets the amount of costs that we have with delivery. I don't know of any other restaurant business that's able to offset those costs as we are. And the reason we are able to do that is, again, because our pricing is so competitive that we're still able to charge £8 on a delivered burrito versus £6.60 in house for a for a burrito.

22:14 So if delivery continues to move forward, it's kind of okay for us. Fundamentally, we're a restaurant, and we would rather people were sat in our restaurants and enjoying our food. But the truth is if delivery remains, it's okay for us. Challenge for the restaurants is a very different one and and one we're glad we don't have to face. So overall, it's been a very strong start and with our target of 45 new sites in the next five years, and we're very confident that we're going to deliver that. I think we mentioned earlier we've opened two sites already this year, one in Bath mid February of this year, and one in Cheshire Oaks, which opened a couple of weeks ago. Both are have opened ahead of expectations, which, again, considering the the world we're in, that's fantastic. Bath's already delivering $20 a week,

23:03 which is great, and Cheshire Oaks has only been a couple of weeks, but very strong start. And we've got signs signed leases in Bournemouth, Portsmouth, Coventry, and Birmingham is just about signed. I would envisage by the end of June this year, we'll be up to six openings. And with nine in nine planned for the year, that puts us ahead of schedule, which is very exciting. That alongside with the three or four cloud kitchens that we'll open, the delivery kitchens, with the franchise opportunities and the licensing opportunities, we should be seeing about 15 or 16 new TORTIA venues in 2022. Andy was very much involved in the launch of the Compass Group relationship, which we we had which we we got involved in them last year, a hugely big opportunity for us with Compass and one of the big monsters of the sector.

24:00 We've opened four sites in their universities. They're changing all their food food layouts in the unis away from the sort of pick up your tray and wander around scenario to getting brands into their unis. So we've now opened a TORTILLA MEXICAN and Sussex University, and they all look great, and they're all performing well. Huge plan for us. They want to do 14 in total, so we'll probably do another four or five this year. And it's great for us. Students are our staple customer. Students love what we do. So we're not only getting them at uni. When they leave uni, they'll be brand ambassadors and loyal supporters of ours as well. So that's a great relationship that we've got into, and that'll potentially open doors with other aspects of Compass around sporting venues, ministry of defense, hospitals, all of those other areas. So very exciting.

24:58 We're gonna open more delivery kitchens. They've proved to be very successful during COVID. The numbers have come off slightly since the reopening of the world, which is not a surprise, but they're still very good businesses, very little CapEx involved, so generally profitable. So our platform for continued growth is great with our relationship with Compass, with SSP, with our own company build sites, delivery kitchens, and other licensing opportunities that will undoubtedly present themselves to us as as we move forward. The trading environment remains uncertain, of course, and a and a fairly standard mantra for me on this is whilst things can be challenging, TORTILLA is better placed than most in the sector to deal with all the various headwinds that are coming at us.

25:48 We have a very favorable property market and one which we're able to take advantage of unlike some of our competitors. There will be and potentially could be shortly, potentially, acquisition potential acquisition growth opportunities. Who knows? We'll keep our eyes out for those. And should something come up, then we would obviously look at that opportunity. Andy's talked a bit about the cost pressures. Clearly, our operation is much simpler than most other hospitality businesses, so our supply chain disruption has been mitigated to a degree. And we work very closely with our two main suppliers. And so we're we're all over them in terms of looking at different ways of mitigating all the costs. And, again, highlighting the fact that our business is very split from the South to the North, Not many restaurant groups succeed in in growing outside of the, affluent South, if you like, and we've proved that this business is hugely popular outside of the Watford Gap, and we continue to look for sites up in that part of the world, and we'll continue to grow the business up in the North Of England.

26:58 Finally, I didn't mention this the actual graph on the right hand side. It was really there to highlight to everybody that whilst we talk a lot about COVID and last year, I think it's important to note that this is not just an average business that's suddenly been catapulted into success through COVID. This business was in great shape pre COVID. Our like for like numbers and sales in January, February 2019 were very strong. We were massively outperforming the peach tracker as we've always done in this sector. So we were moving along very nicely pre COVID. If COVID has done anything, it has allowed us to accelerate the growth and has taken out some competitors along the way. So it's definitely done us a favor, and we're very keen to make the most of those opportunities.

27:50 Therefore, our accelerated UK rollout is one of the strategic growth pillars now for the business to try and open the 15 or 16 differing locations this year. The work with our franchises and partners that we've arranged with through Merlin and SSP and Compass, we'll continue to work on those relationships. Delivery kitchens, we'll continue to grow those. And And obviously, the one area we haven't really touched on is something that we will look at probably back end of this year is international growth. It's fairly clear that the Mexican fast casual sector is very sort of underrepresented in The UK and Europe. And if you look at Chipotle in The US, they have got 2,800 sites, I think, in The US, and we've got 64 or 68.

28:45 So there's a a huge prize out there in Europe, and there's no doubt that it's something that we want to be leading the charge on. There's plenty to keep us busy in The UK, but certainly, it would be wrong for us not to look at international opportunities. So again, just highlighting that there is an increase in our acceleration of rollouts, three sites opened in 'twenty one. We're very confident about this year, and we've highlighted that we're pretty much in and locked with the sites that we're going to open this year. A very balanced geographical spread in The UK, which is a big plus, with five of our top 10 profitable sites based outside the M 25. Our 35% ROCE target is, I mean, a bit of a legacy from our private equity days, and there's a possibility that that could come down if we if we if we felt we wanted to. But so at the moment, we're we're more than happy to continue with that plan.

29:45 We've never closed a site in this estate, which I think is testament to the sort of relentless nature of site finding. We don't take risks. We've got a fantastic property director who's been in the business as long as I have, which is a long time. So he's very well connected, and he knows the market incredibly well. So we're very confident that we we won't be looking or opening sites that won't work for us. And I think our, 45 over the next five years is exciting, challenging, but responsible. You know, we're not looking at doing 25 sites a year, but we do think that our growth is exciting. It's it's good, and, it's gonna keep us very busy. That's for sure. We're very busy as well when you consider some of the partnerships and franchising opportunities we've been looking at as well over the last couple of years.

30:40 I mean, it's, I guess, the best way of describing the appetite of SSP and Compass to work with us was in a short period of time, q one last year, Richard and I sought out some additional revenue streams for the group. We spoke to Merlin and Compass, and we were pushing SSP to roll out more sites in the franchise deal we have with them. None of them needed a great deal of convincing, if we're honest. They they recognize that our food is very much on trend. We saw an opportunity in places like theme parks, zoos, university campuses, hospitals, you know, any canteen arrangement where people want better quality food these days and they and they want they want to have the same brands as they see on the high street. And so we're we're really excited to get into a relationship with Compass.

31:30 We want to we know our product works really well with students. And so we want to kind of prove that that works successfully, and we can it's as much a marketing tool really than a financial one as well because, you know, hopefully, we're acquiring future customers, loyal customers for the brand. And we do think there's a lot of opportunity to enter into other sectors. Merlin has been a big success for us. We're very happy with how we've done there at Chessington. And SSP are delighted with how they're trading in Gatwick, where they're doing nearly GBP 50,000 a week now and we're opening up in Bristol Airport in about a week's time. So it's really exciting. And one thing which is very good about our product when it comes to franchising and outsourcing is the fact that we CPU produce a lot of the most tricky items to to make, and that really derisks the food, which is usually one of your largest sort of franchising concerns.

32:24 So what it means really is, obviously, our focus in The UK is very much bricks and mortar, but it does mean that we can supplement that with opening in places that we ordinarily wouldn't be able to get into or wouldn't consider like contract catering agreements and airports and things. So it's it's a nice dual attack of white space opportunity in The UK. And then just to move on very quickly to delivery kitchens. I've seen a few questions come in on delivery kitchens on the Q and A, which we'll come through at the end. But it's a good success for us, delivery kitchens. What we see as the opportunity on that area is to further saturate some of the London zones. So we recently opened up a unit in Ballon, and actually that didn't create any new white space for us. But what it did mean is it meant that we could take some of the load off our other stores in Wimbledon and Clapham.

33:20 And actually, as a net, if you look at the group position as a whole, we've generated more profit collectively out of those units now. And so we think there are other parts of London where we could do the same, and it helps us to improve our in store experiences and sales as well. And the other key area that we see as part of that strategy is to test new markets where we're not quite sure that the market's gonna work and we wanna open up a bricks and mortar, we could put a delivery kitchen in there. Or equally, we could open up a delivery kitchen on a short term contract ahead of opening a bricks and mortar store to seed the market. So there's a couple of areas where we see opportunities there. And actually, delivery kitchens are expanding internationally in Europe now as well, which may play into our successful our planned strategy.

34:12 A quick slide on international, which I've touched on. You know, there is significant international opportunity. We did some white space work a couple of years ago on, on Europe or a couple of, a couple of countries that came out as kind of red hot potential opportunities for us. We really want to pursue this, but, I mean, all in good time, we've got a we've got a big market in The UK that we're primarily driven to, to to take advantage of. But Europe is something that we are we are keen to look at. We've trade with them, in The Middle East with a company called Ethos. They have nine sites as a franchise over in Dubai, and, generally, they perform very well. So we've got some success with the franchise partner in in outside of The UK. And I think because of the gap in the market between Chipotle US and TORTILLA MEXICANT:] There really has to be an opportunity for us to take this forward.

35:10 It was never a part of our kind of IPO presentation because we are still very excited about The UK. But I think it's important to sort of sow the seed with potential investors that it is something that we will be looking at probably by the end of this year. So finally, summary and outlook. Well, despite all the various challenges and headwinds and constant, issues that have been thrown at this sector over the last, well, probably since we voted out of Europe in 2016. You know, this business has been able to adapt and pivot and move around, and and has come out of everything in in very strong shape and very exciting for for Andy and I and the rest of the management team to to take advantage of that and to really move this business forward.

36:03 You know, last year was definitely transformational for us, you know, record financial results despite and because of the headwinds, really, you know, despite the challenges of sites being closed, but also the fact that a lot of our competitors weren't able to trade definitely did us a favor. You know, we've got a strong brand. We want to get the name out there a lot more this year. We've got some big plans with our marketing team to, do some big promotions for ourselves so that, you know, instead of going for a burrito, you're going for a tortilla, much like going for a namdo's. That's big plan, to try and get our name out there as as much as we can. We are well positioned to navigate the undoubted challenges over the next however long, and we seem to have been dealing with challenges for a long time. So we're we're quite used to finding a way through them.

36:52 And, certainly, with the work that Andy's done in the background with our utility costs and all our supply chain challenges, I'm very confident that we'll we'll ride this storm as well as we have the the the other ones. We do benefit from being able to trade in many different locations. The fact that we can trade out 500 square feet or 2,000 square feet, the fact that we don't need extraction, the fact that we don't use fryers, the fact that we have no freezers in our business because we're literally selling fresh product. All of these things give us a really good differentiation against our competitors and allows us to have a relatively competitive CapEx cost for for new sites. By taking extraction out, you're automatically dropping your costs by up to $50.

37:37 So that's a great, great way of us to expand the business. Central production kitchen is set and ready to take us to a 100 sites. We have recently signed or we're about to sign on the space next door to us in in our existing CPU. So we're thinking two, three, five years ahead to make sure that we can increase the size of our central production kitchen. So that's really good news because finding warehouse facilities at the moment is, is quite a challenge. So fundamentally, the end result is we are very confident of delivering all of our exciting plans for this business. You know, we we do still think that despite everything, we sit in a really good place, and and we're very excited to take advantage of of all of those situations.

38:26 So, thank you very much for your time. That's great. Richard, Andy, thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just using the q and a tab that's situated on the right hand corner of your screen. But just while Richard and Andy take a few moments to review those questions submitted already, I would like to remind you that a recording of this presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard. Andy, Richard, as you can see, we've received a number of questions throughout today's presentation. Thank you to all investors for submitting their questions. If I could please ask you just to open up that q and a tab, and where it's appropriate to do so, read out the question and give your response, And then I'll pick up from you at the end. Thank you. Okay. Well, we'll we'll probably just work down the list actually. So the first one is, as franchising is a hierarchy activity, how can this be leveraged? How many and how fast can franchising grow for the business?

39:18 I think it's a very interesting question. There's no doubt that what we've managed to do with our central production kitchen and to mitigate all the issues around franchising, this is now a very attractive franchising opportunity. And there's no doubt that when we talk about Europe, it almost certainly would be through a franchising opportunity. And I I think by all of our processes and minimizing the ability for a a franchisor to mess it up, we we've done as much as we possibly can on that. So absolutely right. This is a very exciting opportunity for us. Obviously, financially, you know, we're at sort of 20% of a company owned site, and franchising is maybe six or seven. So, you know, really, company owned sites will always be the preferred route, certainly in The UK.

40:08 But there's no doubt that for growing the brand and taking us into territories that we don't know, franchising is definitely one of the key drivers for us going forward. Okay. Second one from Jake was around Gatwick. So airports, Gatwick sounds amazing. Revenues, 2,500,000 versus around £1,000,000 for Euston. How many how can sorry, how can airports be leveraged more? How many airport stores do you expect globally? I mean, I can answer that one. I think we certainly want to be in more airports. We are opening in Bristol Airport in about a week's time, and we think there are other opportunities. Obviously, Heathrow is always the golden child of the airport world, so we'd love to get a sight in there. So, yeah, we're very much chasing that opportunity, and SSP have obviously got a great sort of presence in in all the airports and internationally. You know, they've got a lot of sites in places like Frankfurt Airport.

41:08 And so I think when you talk about the expectation globally, I think we would love to leverage our existing relationship with SSP be able to explore things internationally in combination with doing it ourselves in those countries as well. So, yeah, we definitely see an opportunity for more more airport space. The food works very well in those environments. It's quick. If you're in a rush to get your flight, you can quickly eat it. It's not you know, there's not as much sort of sit down necessarily needed. Okay? So the next one was how will Taco Bell's expansion impact your business? Yeah. Good question. Taco Bell for us is, you know, they are going quite hard at it, and but but they are it's a slightly different market. You know? They are the fast food of Mexican casual.

41:58 You know? They're cheap. Their product is frozen. It's it's okay for what you get. And they definitely they do trade near us in a few locations. So would they be a competitor? Yeah. I think they would be a competitor, but I do think that there's a there's a noticeable difference. Well, obviously, there is because they're sort of, you know, 25, 30% cheaper than we are. The answer to the question is how will they impact us? We don't really know. They've got probably four or five sites near us. We still trade very well when we do trade near them. There's plenty of room in this country to have two Mexican businesses. So we'll see. Time will tell. But they are probably the one growing as fast as we are and the only one that's growing as fast fast as we are, all franchise sites as well, I think.

42:47 Okay. Then another question from Jake around dark kitchens. Will this aid faster expansion? How many can we expect? How can this be better. We'd love to see more stores in the counties surrounding London. Yes, I think the dark kitchens model is very well suited to what we do. We do perform very well in the ones in London. And actually, we've got one in Manchester as well, which we opened as a bit of test and learn because we don't have a store in Manchester. And so it was interesting to see how we would perform opening up a a delivery dark kitchen, so to speak, without a brand there, and it and it's gone well. So I think there is a lot more opportunity. There's a lot of funds being thrown at the sector at the moment, and we we've met some interesting businesses, and we've got a partnership with Growth Kitchen. So we do see a lot of opportunity.

43:36 I think the biggest barrier to opening into all parts of sorts of Essex, sorts Archer and Cairns and places is not so much the availability of delivery kitchens, but the availability of delivery riders. Delivery, obviously, very strong in London. But outside of that, market is a little bit underdeveloped. So I think in certainly in the cities, there's opportunity. But I think in the sort of more rural market towns, it's gonna be a little bit longer time coming. We're hoping to open in Canterbury later this year as well. So that's I think that's Kent, isn't it? Yes. Yes. Okay. So from David, then there's, can you go into more detail on the availability of attractive real estate for new locations? Is there any chance that you can accelerate your openings in the short term? It's always an interesting question.

44:24 Yes. Well, when we tell you the story and we and everybody hears it, everyone does get very excited quite rightly, and then they say, well, wow, why don't you go faster? And the truth is we think that 15 or 16 sites this year having gone from four to five in previous years is quite a big step up. You know, we have brought in some more people into our head office team. They are all kind of getting their feet under the table and understanding the business. If opportunity presents itself to open more going forward, we probably would take that. But I'm also conscious there have been quite a lot of casualties in this sector, especially restaurant businesses that have listed in the past and haven't done so well. You know, I've seen businesses like, you know, buyer in the burger business. You know, they they they were a hugely successful business, grew too quickly, all went horribly wrong.

45:14 I think we'll always take what opportunities are there for us, but we want to try and do it responsibly and carefully and make sure that this business is here for a long time and and not just try and flog it for the next two years, I think there's still quite exciting growth for us. Okay. So the next question is from David again. What what are you looking to acquire? Do you want an additional brand, or is it to acquire attractive sites and rebrand to TORTILLA MEXICANT:] I guess both of those opportunities are obviously interesting. I think the opportunity to roll out our own business this year will keep us very busy. But a lot of brands have had success with virtual brands out of their sites. So I think both are potential opportunities, and we'll we'll we'll look at stuff as and when it comes to market, if it's of interest in this, anything that might be of interest to TORTILLA and our shareholders.

46:10 So there's no sort of firm things, but it's just just an I guess, an aspiration of ours at some stage that that might become available. Okay. Next one about half construction costs meaningfully increased. How do you feel about your guidance of CapEx costs per new site of 350 to 425? No. It's fine. I think I've we've not heard we've not seen too much. I I think there's potential concerns about how long it's taking to get the products in, but with because we we we've sort of bought ahead, if you like, because we knew we were gonna do nine sites this year. We bought ahead on some of the key things, things like furniture and kitchen equipment. So so far, so good in terms of costs for openings. We've seen no sign of increase.

47:00 Okay. And there's a question from Mark around our 45 sites. Will these sites be primarily focused on delivery kitchen expansion or to explore further international opportunities? When we talk about the 45 sites, that's very much a bricks and mortar rollout story of we wanted to open nine nine a year over the next five years. The delivery kitchen expansion would then be on top of that. So we probably open sort of three, maybe four sites a year of delivery kitchens to supplement that bricks and mortar rollout. And then on top of that, we would supplement that further with franchising opportunities. The international piece would then be on top of that, and we if we were to do that, we would obviously have to sort of resource ourselves accordingly, but that's that's not our primary focus at the moment. That's that's a more of a an opportunity in the in the sort of medium to long term.

47:54 Just in the interest of time, I don't know how many we've got left, but we probably we could probably take maybe one more, I think. Yeah. Or we could quite try and quickly answer this. So can you discuss economics of Compass deal? Anything you can disclose your profitability and how it compares to a typical TORTILLA MEXICAN GRILL We can't disclose the franchise fee, but we can say that it's within the normal realms of a traditional sort of franchise arrangement. But one thing that we do is we do sell them our central production food. And so we're able to sort of leverage our fixed cost there and spread those amongst more businesses by supplying those franchise businesses as well. So that does create a slight slightly increased profitability compared to a normal normal arrangement.

48:45 As you mentioned coming up 35% on your target, can you elaborate a little more on your thoughts there? Is this too difficult to achieve or too limiting? Good question. No, not too difficult to achieve. In fact, we're we're substantially over that the last few sites we've opened with the benefits of the rent market being in our favor and actually getting some quite favorable deals from landlords. It's just that I think 35% is a bit of a legacy from private equity. And and, you know, if we want to expand and we wanna grow quite quickly, is 35 necessary? It could be less than that. You know, we're a pretty cash rich business. We're, you know, we're in pretty good shape. Maybe that could be 30%. I think we'll just have to take a view. At the moment, that number is hugely achievable, but that it's not written in stone that we continue with that. Okay.

49:32 Should we do one more than four? This one here from Afghani. Oh, no. This Oh, that's just a thank you very much. Thank you very much. Thank very much. Very kind. If abroad, which country do you personally prefer to enter first in the EU? I don't think we can probably say that yet, but we have looked at various ones, and I think, you know, we would probably now are certain ones. I mean, Ireland's a good one. Holland's a good one. Spain's a good one. Germany's a good one. There are those are the ones that probably jump out as the most potentially achievable ones. France is one that you would assume is but we've heard some some horror stories about France, so we might not look at that as a priority.

50:21 So I think Richard and a couple off, but thanks very much. Absolutely. If I may just jump back in there. Obviously, we will make all of the questions submitted today available to you immediately after the presentation has ended. And ladies and gentlemen, we'll publish all of those responses on the investment company platform where it's appropriate to do so, and you'll be notified by email when these are ready for your review. But perhaps we'll redirect investors to provide you with their feedback, which, Andy, which I know is particularly important. Can I just ask you for a few closing comments to wrap up with? Look, thanks very much for your time. All of the only thing I would like to say is I think I'm hoping that you probably came into this presentation thinking about another hospitality sector that another hospitality business and thinking, oh god. You know, there's too much going on in that world. But I'm I'm hoping we've managed to convince you that, you know, we don't sit very very much much in the rest of the hospitality world. We are slightly different.

51:16 We're very nuanced. We're slightly differentiated. We have a fantastic product at a great price. And, actually, as things get more and more difficult, we tend to perform better. So I I hope that the markets won't lump us in with hospitality and leisure generally, and we'll look at TORTILLA as a separate business. And and, hopefully, the information that we passed on to you today will make you realize that, actually, this is a cracking business and a great investment. And, hopefully, that's what you'll think, and thanks for your time again. Thank you very much, everyone. Richard, Andy, thank you very much indeed for taking the time to update investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback order the management team can better understand your views and expectations.

52:02 This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of TORTILLA MEXICAN GRILL PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.